TSX rises, Dow takes dip after Fed ups interest rate

TORONTO — Canada’s main stock index rose slightly while U.S. markets closed down after the U.S. Federal Reserve raised interest rates that reinforced the strength of the American economy.

Reserve Chairman Jerome Powell’s comments about U.S. economic growth is positive for Canada and signals to the Bank of Canada that it can also raise rates without fear of causing the loonie to overheat, says Mike Greenberg, portfolio manager at Franklin Templeton Multi-Asset Solutions.

“A bit more strong economic growth is good for Canada,” he said in an interview.

In its commentary, the U.S. central bank removed past references to being “accommodative,” which suggests it will be tempered in rate hikes and may be getting closer to the end of regular increases, said Greenberg.

He expects another U.S. increase this year and three in 2019. Further increases will depend on data.

“If rates are rising gradually because the economy is doing better, inflation is recovering but not overshooting, that tends to be pretty good for corporates,” he said, adding that the level of rates isn’t restrictive for most companies.

“We’re not at that level of interest rates that we would call a choke point for the economy.”

Greenberg expects the Bank of Canada to “somewhat follow the path” by increasing its own benchmark rate even though the sensitivity to interest rates is higher in Canada because of elevated consumer debt levels.

The S&P/TSX composite index gained 9.78 points to 16,169.28, after hitting a high of 16,241.41 on 232.4 million shares traded.

The telecom sector led, followed by consumer discretionary and influential industrials and financials sectors.

Gold, healthcare, real estate and materials led on the downside.

In New York, the Dow Jones industrial average closed off 106.93 points to 26,385.28. The S&P 500 index was down 9.59 points to 2,905.97, while the Nasdaq composite lost 17.10 points to 7,990.37.

The Canadian dollar traded at an average of 77.07 cents US compared with an average of 77.23 cents US on Tuesday.

The November crude contract was down 71 cents at US$71.57 per barrel and the November natural gas contract was down 7.8 cents at US$2.98.

The December gold contract was down US$6.00 at US$1,199.10 an ounce and the December copper contract was up 0.45 of a cent at US$2.83 a pound.