The TSX shed 1.23 per cent today as weaker energy stocks presaged a U.S. interest rate decision.

The healthcare, technology and energy indices were among the biggest decliners, falling 4.16, 2.45, and 0.64 per cent, respectively.

The U.S. Fed was expected to raise its policy range by 0.75 per cent for a fourth consecutive time and proceeded to follow through on that notion.

The country’s policy range now stands at 3.75-4 per cent, the highest level since 2008 and the most hawkish tightening campaign since the 1980s. 

The Fed will also continue to reduce its treasury and mortgage-backed security positions at approximately US$1.1 trillion per year.

Consensus sees the U.S. terminal rate in the range of 4-5 per cent, meaning there is little in the way of flexibility should the central bank need to raise rates further. Members will meet once more this year in mid-December, with current forecasts predicting a lower 0.5 per cent rate increase.

Today’s decision is less than a week before the midterm U.S. elections, which have positioned inflation as a top issue determining constituents’ well-being and the country’s economic role on the world stage.

The U.S. market ended the trading day on a pessimistic note, closing down by 2.05 per cent.

Meanwhile, Bank of Canada (BoC) Governor Tiff Macklem sees another large rate hike increase as well within the realm of possibilities, though he believes the country is in the second half of the tightening cycle.

Macklem made these remarks before a Senate committee yesterday alongside Senior Deputy Governor Carolyn Rogers, who noted that solving supply chain problems could lower inflationary pressures but wouldn’t substitute the need for higher rates.

The BoC declared a smaller-than-expected 0.5 per cent hike last week after inflation steadily declined to 6.9 per cent in September from 8.1 per cent in June. This suggests imminent deceleration in the tightening cycle.

Conversely, the BoC’s latest monetary policy report predicts a sizeable slowdown for Canada’s economy by year-end and into the first half of 2023. 

The prediction is in line with flattening employment, a falling housing market, decreases in manufacturing, and record credit card debt, which mirrors dynamics in the U.S.:

  • According to yesterday’s consumer survey from Equifax Canada, the average credit card balance reached a record of C$2,121 in September, the highest since Q4 2019. Credit card use has now increased for six consecutive quarters
  • After a meteoric rise since the depths of the pandemic, Canadian employment has remained relatively unchanged since February 2022, according to Statistics Canada’s Labour Force Survey
  • Manufacturing sales fell by 2 per cent to C$70.4 billion in August, a fourth consecutive monthly decline
  • According to CREA, the actual number of housing transactions in September 2022 came in 32.2 per cent lower YoY, about 12 per cent below the pre-pandemic 10-year average for the month

In notable news from large cap issuers, Canada Goose fell by 8.95 per cent after cutting its full-year revenue outlook, as consumers prioritize saving and cut back on luxury spending, while Cenovus fell by 0.32 per cent after beating estimated quarterly adjusted earnings thanks to sky-high oil and gas prices.

The TSX has fallen by 9.09 per cent over the past year, offering investors superior returns to the U.S. (-13.31 per cent), Developed International (-20.47 per cent) and Emerging Markets (-24.77 per cent) thanks to its outsized exposure to banks and commodities.

Market movers

As markets contend with growing pessimism, our readers continue to seek out differentiated small and micro-cap opportunities in strong sectors, such as commodities, as well as those in the midst of a correction, such as technology, where undervaluation is more likely to be found.

Below are three stories with the highest traffic since the beginning of the week:

Spey Resources (SPEY) recently reported 99.5-per-cent extraction of battery-grade lithium carbonate.

Canada Silver Cobalt (CCW) announced new assay results from its 60,000-metre drill program at Castle East, including intercepts up to 2,900 g/t silver and 1.05 per cent cobalt over 0.5 metres.

Finally, Datametrex AI (DM) subsidiary, Medi-Call, has secured three distribution agreements with international student agencies.

Capital raise announcements since our last update include G2 Energy, Pershimex Resources, Rio Silver, Thiogenesis Therapeutics and Green River Gold.


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