TORONTO — Canada's main stock index posted a triple-digit decline and U.S. markets fell after the Federal Reserve signalled an interest rate cut next month could be smaller than forecast.
Markets have risen on anticipation of a potential 50 basis point rate cut but declined Tuesday after central bank officials suggested that cuts may not be certain or as large, says Anish Chopra, managing director with Portfolio Management Corp.
"Market expectations may be a touch ahead on rate cuts," he said in an interview.
Fed Chairman Jerome Powell said Tuesday the economic outlook has become cloudier since early May, with rising uncertainties over trade and global growth causing the central bank to reassess its next move on interest rates.
While he didn't commit to its first rate cut since 2008, James Bullard, head of the Fed's St. Louis regional bank, said that he believed a quarter-point cut in July would be sufficient as an insurance move against a possible severe economic slowdown.
"They still seem to be saying the U.S. economy is strong, employment is strong, lots of things are going well but if they do cut rates it wouldn't be as much as the market had anticipated last week," said Chopra.
The S&P/TSX composite index closed down 152.19 points to 16,371.28.
All 11 major sectors were lower, led by a 3.55 per cent drop by technology as Shopify Inc. lost nine per cent and Blackberry Ltd. was off 2.4 per cent on heavier trading.
Materials was dropped 1.3 per cent despite gold prices rising again, to reach its highest level in about six years.
The August gold contract was up 50 cents at US$1,418.70 an ounce and the July copper contract was up three cents at US$2.74 a pound.
Sherritt International and Yamana Gold Inc. were off 5.3 and 3.3 per cent respectively.
The key energy sector lost 0.64 per cent, followed by a 0.55 per cent drop by the heavyweight financial sector.
The August crude contract was down seven cents at US$57.83 per barrel and the August natural gas contract was up 0.2 cents at US$2.29 per mmBTU.
Oil prices fell on concerns that an unresolved trade dispute between the U.S. and China will hurt global economic growth, partly offset by higher prices resulting from ratcheted tensions between the United States and Iran.
The Canadian dollar traded for an average of 75.91 cents US compared with an average of 75.79 cents US on Monday.
In New York, the Dow Jones industrial average was down 179.32 points at 26,548.22. The S&P 500 index was down 27.97 points at 2,917.38, while the Nasdaq composite was down 120.98 points at 7,884.72.
In addition to watching signals about interest rates, investors are uneasy about whether a meeting later this week between U.S. President Donald Trump and Chinese President Xi Jingping will push toward a trade resolution, added Chopra.
"Any news that seems to come out just seems like not much will happen at the G20 summit. A best case you're really looking at is they say OK there'll be some delay in increasing tariffs to allow the negotiations to start again."
Companies in this story: (TSX:S, TSX:YRI, TSX:SHOP, TSX:BB, TSX:GSPTSE, TSX:CADUSD=X)
— With files from The Associated Press.
Ross Marowits, The Canadian Press