TORONTO — North American stock markets closed higher on Wednesday after the U.S. Federal Reserve hiked interest rates and hinted at the possibility of six more rate hikes this year, as the U.S. inflation should remain high.
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Markets plunged after the central bank announced around 2:00 p.m. that interest rates could rise more than some had expected. They started to rise again, however, when Fed Chairman Jerome Powell insisted that such hikes were not guaranteed.
“I think the market liked to hear that. (…) Mr. Powell said again that nothing is set in stone, every meeting is live, and we are digesting economic data as we go, “said Allan Small, adviser investment principal at IA Private Wealth Management.
The central bank expects inflation to remain high and end 2022 at 4.3%. That’s well above the Fed’s 2.0% annual target. The authorities are also now forecasting much slower economic growth this year, at 2.8%, compared to 4.0% growth in their previous December estimate.
Still, Mr Powell said the underlying US economy remained very strong and there were more job openings than there were people willing to fill them.
“And even if the rate hikes start to slow down the labor market, which is the fear that some have, (Mr. Powell) says they have more than enough capacity to handle that,” Mr. Small continued during of an interview.
The Toronto floor’s S&P/TSX Composite Index climbed 280.99 points to end the day at 21,468.83 points.
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In New York, the Dow Jones Industrial Average gained 518.76 points to 34,063.10 points. The broader S&P 500 index advanced 95.41 points to 4,357.86 points, while the Nasdaq Composite Index gained 487.93 points, or 3.8%, to 13,436.55 points.
The materials sector of the Toronto Stock Exchange was the only one to retreat on Wednesday, in particular due to a further decline in the price of gold.
The price of bullion fell US$20.50 to US$1,909.20 an ounce on the New York Commodity Exchange, and that of copper rose 8.8 cents US to US$4.60 the pound.
The information technology sector gained 6.0% despite rising bond yields. Shopify’s stock gained 11.6% and Nuvei’s 10.5%.
The health care sector gained 4.8%, and the consumer discretionary sector gained 2.8%.
The energy group also advanced, despite a further decline in oil prices.
Crude oil returned US$1.40 to US$95.04 a barrel in New York, while natural gas rose 18 cents to US$4.75 per million BTU.
In the currency market, the Canadian dollar traded at an average rate of 78.61 cents US, up from 78.11 cents US the previous day.
The Canadian Press