Stock markets mixed as Fed releases minutes, signals that rate hike is coming

TORONTO – Rising gold and materials stocks helped push the Toronto stock market higher Wednesday, while New York indices finished flat after the U.S. Federal Reserve released minutes that showed its decision to hold interest rates last month was a “close call.”

The S&P/TSX composite index in Toronto gained 69.37 points at 14,618.97, with the energy sector being one of only two sectors that were down.

The Canadian dollar fell 0.10 of a cent to 75.42 cents US.

In New York, the Dow Jones industrial average added 15.54 points to 18,144.20, while the S&P 500 advanced 2.45 points to 2,139.18. The Nasdaq composite lost 7.77 points at 5,239.02.

Minutes from the U.S. Fed’s Sept. 20-21 meeting showed officials were inching closer to hiking rates for the first time since last December, but had decided to hold off due to inflation and little sign of rising wage pressures.

The minutes said that some officials believed it would be appropriate to raise rates “relatively soon” if the labour market kept improving.

Many economists expect the Fed to keep rates unchanged at the next meeting in November due to the U.S. presidential election, but raise rates by a modest quarter-point in December.

Senior portfolio manager Susan Da Sie of Manulife Asset Management said the central bank continues to send a clear signal that it’s moving towards a rate hike, but that decision can still change if the economic data in the next two months doesn’t support such a move.

She said the Fed is facing a time crunch because rates need to be higher than current levels in case the economy goes into a recession again.

“You have to reload interest rates so (that) in the next four years, if there is a recession, you do have higher rates,” said Da Sie.

She noted that the markets will likely continue to stay volatile until the U.S. election. Most are expecting Democrat Hillary Clinton to win, with a Republican majority in Congress. If that turns out to not be the case, the markets will likely react negatively.

Da Sie said a Democratic majority in Congress could be seen as a negative to financial services, health care and energy firms. A win by Republican candidate Donald Trump could be seen as having a dampening effect on global economic growth due to his stance on trade.

In commodities, the November crude contract faded 61 cents at US$50.18 per barrel. Oil prices had briefly dipped below US$50 a barrel earlier in the day, after hitting their highest level in more than a year on Monday.

Elsewhere, the December gold contract fell $2.10 to US$1,253.80 an ounce, November natural gas dipped three cents at $3.21 per mmBTU, and December copper contracts were down a penny to $2.18 a pound.

— With files from The Associated Press

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