Canadian Stocks Move Notably Lower In Reaction To Fed Minutes

(RTTNews) - After seeing modest strength for much of the session, Canadian stocks came under pressure in afternoon trading on Wednesday.

The benchmark S&P/TSX Composite Index slumped 196.86 points or 0.9 percent to 21,039.66 after reaching a high of 21,037.44.

The late-day weakness reflected a negative reaction to the minutes of the Federal Reserve's latest monetary policy meeting.

The Fed minutes seemed to have a more hawkish tone, raising concerns the central bank will be more aggressive than anticipated.

According to the minutes of the December 14-15 meeting, members of the Fed are preparing to begin reducing the size of the central bank's approximately $8.8 trillion balance sheet soon after raising interest rates.

Kathy Bostjancic, Chief U.S. Financial Economist at Oxford Economics, said the minutes reflected the Fed's "rising discomfort with elevated inflation and stronger confidence in the recovery of the economy and the labor market despite the downside risks due to the Omicron variant."

"The hawkish tone of the minutes underscores the likelihood of three rate hikes this year, but also signals a reduction in the size of the balance sheet that could start by mid-2022," she added.

Healthcare stocks showed a substantial move to the downside on the day, dragging the S&P/TSX Capped Health Care Index down by 4 percent.

Considerable weakness also emerged among technology stocks, as reflected by the 3.7 percent nosedive by the S&P/TSX Capped Information Technology Index.

Real estate, industrial and consumer stocks also came under pressure over the course of the session, while energy stocks bucked the downtrend amid a continued increase by the price of crude oil.