Traders work by a screen showing a news conference with U.S. Federal Reserve Chair Jerome Powell on June 18. Markets fell on Wednesday on reports that President Donald Trump wanted to fire Mr. Powell.Brendan McDermid/Reuters
Canada’s main stock index, along with counterparts in the United States, ended higher on Wednesday as investors shrugged off increased uncertainty about the leadership of the Federal Reserve.
The S&P/TSX composite index ended up 98.83 points, or 0.4 per cent, at 27,152.97, moving closer to the record closing high it posted on Tuesday.
Wall Street benchmarks also ended higher despite a chaotic half hour when news reports suggested U.S. President Donald Trump was set to fire Fed Chair Jerome Powell.
“Markets, as they always do, they look forward six to 12 months,” said Stan Wong, a portfolio manager at Scotia Wealth Management. “In Canada, the market has rebounded from its worst fears of what the economy would look like which would be a tremendous amount of trade and tariff uncertainty. We’ve gotten a little bit more color and more clarity around that.”
Prime Minister Mark Carney said Canada will introduce a tariff rate quota for countries with which it has free trade agreements, excluding the United States, to protect the domestic steel industry.
“Compared to the U.S., valuations remain compelling in Canada and if (interest) rates move lower then the dividend yields, which are higher in Canada, will be a big draw for investors,” Wong said.
Shortly before midday, the benchmark S&P 500 and Nasdaq fell more than 1 per cent, while the U.S. dollar plunged and Treasury yields rose, after Bloomberg News reported the possibility of replacing Mr. Powell, citing an unidentified White House official.
Separately, Reuters News reported, citing a source, that Mr. Trump was open to the idea of firing Mr. Powell.
Mr. Trump was quick to deny the reports, even as he unleashed a new barrage of criticism against Powell for not cutting interest rates.
“The Fed’s independence is hugely important to our overall economy, so you saw the market react when that initial headline came out,” said Dylan Bell, chief investment officer at CalBay Investments.
Mr. Trump’s denial revived equity markets, with the Nasdaq Composite closing at 20,730.49, a gain of 52.69 points, or 0.26 per cent. It was the fifth session in six that the technology-heavy index has posted a record high.
The Dow Jones Industrial Average rose 231.49 points, or 0.53 per cent, to 44,254.78, and the S&P 500 gained 19.94 points, or 0.32 per cent, at 6,263.70.
The CBOE Volatility Index, Wall Street’s “fear gauge,” hit a more than three-week high in the wake of the initial Powell reports, but eased from those levels.
Despite Mr. Trump’s demands for easier credit, Fed officials have resisted cutting rates until there is clarity on whether his tariffs on U.S. trading partners reignite inflation.
This concern was iterated by Atlanta Fed President Raphael Bostic on Wednesday, saying in a Fox Business interview that pressures may be building in the wake of rising import taxes.
Inflation has been in focus this week. Producer prices data released on Wednesday showed growth flatlined in June, as tariff-driven goods costs were balanced out by weaker service prices.
Just a day earlier, unexpectedly strong consumer inflation had already dented hopes for deeper Fed rate cuts, with Mr. Trump’s tariffs partly fuelling the uptick in prices.
On Wednesday, the second day of this earnings season, another round of stronger profits from Wall Street’s big banks failed to ignite their own stock prices.
Goldman Sachs climbed 0.9 per cent after notching a 22 per cent earnings surge, while Bank of America and Morgan Stanley declined 0.3 per cent and 1.3 per cent, respectively, despite posting higher profits.
- Reuters, Globe Staff
- Reuters