By Ketki Saxena
Investing.com -- At 1:00 p.m in Toronto, the S&P/TSX Composite index was at 19,809.05 points, down -2.30% in the day’s trading and officially in correction territory, over 10% below its all-time high. On Wall Street, the S&P 500 down more than 20% from its record, entering a bear market.
Markets are being dominated by fears of aggressive policy tightening by the Federal Reserve to combat inflation, and worries the central bank may trigger a recession. While a 50 basis point hike is widely expected, markets are now pricing in a 30% probability of a 75 basis point hike following Friday’s 8.6% CPI reading.
Canadian investors are also weighing this morning’s robust household debt figures, likely to assuage the Bank of Canada’s concerns about a potential shock to the economy, further strengthening its case for rates to be at or above 3.25% by the end of this year.
All TSX sectors were in the red at midday, with Canada's commodity heavy index further pressured by weakness in energy (-2.64%). The subindex tracked the price of crude lower following another Covid-19 outbreak and related restrictions in Bejing, which worsened worries of slowed demand from the world’s second-largest importer of crude after the reimposition of lockdowns in Shanghai last week. China is reinstating these rules after a short-lived attempt at reopening in the first week of June.
The TSX was also weighed down by materials (-3.75%) which tracked the decline in gold. Bullion strengthened as the dollar strengthened and Treasury yields were sharply higher.
Rate-sensitive tech (-3.36%) and healthcare (-4.00%), and real estate (-3.23%), hit by the sharp rise in borrowing costs, were amongst the worst performing sectors on the TSX today.
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