Canadian Stocks Slump Amid Negative Reaction To Monetary Policy Announcements

(RTTNews) - Canadian stocks came under pressure early in the session on Wednesday and saw further downside over the course of the trading day, closing notably lower.

The benchmark S&P/TSX Composite Index fell to new lows for the session in late-day trading before regaining some ground going into the close. The index still ended the day down 274.90 points or 0.9 percent at 30,144.78.

The weakness on Bay Street came amid a negative reaction to monetary policy announcements by the central banks on both sides of the border.

While the Bank of Canada lowered interest rates by a quarter point as widely expected, the Canadian central bank indicated it now expects to keep rates on hold.

The BoC said it sees the current policy rate at "about the right level" after lowering rates by 25 basis points, highlighting the limited role monetary policy can play amid the structural damage caused by the trade conflict between the U.S. and Canada.

Stocks reacted negatively to the Bank of Canada's announcement and saw further downside after the U.S. Federal Reserve announced its latest monetary policy decision.

While the Fed lowered interest rates by another quarter point as widely expected, Fed Chair Jerome Powell's post-meeting remarks partly offset optimism about another rate cut in December.

Powell said a further reduction in rates in December is "not a foregone conclusion," noting Fed officials had "strongly differing views about how to proceed" at the final meeting of the year.

Highlighting the high level of uncertainty due to government shutdown delaying key data, Powell also said there's a "growing chorus" that feels the Fed should "wait a cycle" to continue cutting rates.

Following Powell's comments, CME Group's FedWatch Tool indicates the chances the Fed leaves rates unchanged in December have jumped to 34.1 percent from just 9.1 percent yesterday.

Consumer staples stocks turned in some of the market's worst performances on the day, resulting in a 3.7 percent nosedive by the S&P/TSX Capped Consumer Staples Index.

Interest rate sensitive real estate stocks also saw considerable weakness along with technology, industrial and financial stocks, while energy stocks bucked the downtrend amid a rebound by the price of crude oil.