Canadian Market Plunges After Sharp Rate Hike, But Recovers Well To Trim Losses

(RTTNews) - The Canadian market is down in negative territory a little past noon on Wednesday after the Bank of Canada raised rates by as much as 1%, and revised upward its inflation forecast.

Data showing an acceleration in U.S. inflation in the month of June is weighing as well on investor sentiment.

After a sharp plunge, the market has regained some lost ground thanks to several stocks from materials and consumer staples posting strong gains.

Financials and industrials shares are among the major losers. Healthcare stocks are also mostly weak.

The benchmark S&P/TSX Composite Index, which tumbled to 18,378.83, losing nearly 300 points in the process, has recovered to 18,611.66, down just 66.98 points or 0.36% about a quarter past noon.

The Bank of Canada raised rates by 100 basis points to 2.5% to combat galloping inflation. The central bank also lifted its near-term inflation forecasts, warning of an increased risk of higher price gains becoming entrenched, as it slashed its growth forecasts for 2022 and 2023.

Meanwhile, data from the U.S. Labor Department showed that the consumer price index shot up by 1.3% in June after jumping by 1% in May. Economists had expected consumer prices to leap by 1.1%.

With the bigger than expected monthly surge, the annual rate of consumer price growth accelerated to 9.1% in June, reflecting the biggest increase since November 1981. Economists had expected the annual rate of consumer price growth to accelerate to 8.8% in June from 8.6% in May.

The red-hot inflation data supported expectations for a more aggressive tightening path from the Fed in the coming months.

Ritchie Bros. Auctioneers (RBA.TO) is down more than 7%. Goeasy (GSY.TO), ATS Automation Tooling Systems (ATA.TO), TFI International (TFII.TO), Magna International (MG.TO), WSP Global (WSP.TO), Cogeco Inc (CGO.TO), Cogeco Communications (CCA.TO) and Fairfax Financial Holdings (FFH.TO) are down 2 to 5%.

Bank of Montreal (BMO.TO), West Fraser Timber (WFG.TO), Royal Bank of Canada (RY.TO) and Kinaxis Inc (KXS.TO) are also notably lower.

Tourmaline Oil Corp (TOU.TO), Turquoise Hill Resources (TRQ.TO), Loblaw Companies (L.TO), Agnico Eagle Mines (AEM.TO), Franco-Nevada Corp (FNV.TO), Dollarama (DOL.TO), George Weston (WN.TO) and Nutrien (NTR.TO) are gaining 1.6 to 2.5%.