Canada’s main stock index finished lower on Monday while U.S. markets also lost ground ahead of key interest rate decisions in Canada and the U.S. later this week.
Hadiza Djataou, vice-president and portfolio manager of global bonds at Mackenzie Investments, said the declines in the market came alongside a risk-off move that has been playing out since November.
“Markets are becoming increasingly fragile … because you have well-known pockets of excesses, AI would be one, Bitcoin would be another one. The buying-the-dip mentality doesn’t prevail anymore,” she said.
“Why? Because we are at the end of the year, most investors are not trying to add risk at this point in time, and that adds to the fragility.”
With the Bank of Canada scheduled to make its next interest rate announcement on Wednesday, Djataou said the market is not expecting a rate cut.
“But I do think it would be interesting to see what their read is on the stronger data we had recently on the labour market,” she said.
Canada’s economy continued to blow past job forecasts in November but some economists caution against reading too much into a series of strong headline figures. Statistics Canada said last Friday that the economy added 54,000 new positions last month compared with economists’ expectations for a small loss.
The S&P/TSX composite index was down 141.44 points at 31,169.97.
The U.S. stock market has become much more calm recently following weeks of sharp and scary swings. It could remain quiet as traders await the highlight of this week, which will arrive Wednesday when the U.S. Federal Reserve announces its latest move on interest rates.
Stocks have already run to the edge of their records on widespread expectations that the Fed will cut its main interest rate for the third time this year. Lower interest rates can give the economy and prices for investments a boost, though their downside is that they can worsen inflation.
The big question is what kind of hints the Fed will offer about where rates will go after Wednesday. Many on Wall Street are bracing for talk aimed at tamping down expectations for more cuts in 2026.
“What the market is going to find a direction from is the forward guidance,” Djataou said.
U.S. inflation has stubbornly remained above the Fed’s 2% target, and Fed officials are notably split in their opinions about whether high inflation or the slowing job market is the bigger threat to the economy.
In New York, the Dow Jones industrial average was down 215.67 points at 47,739.32. The S&P 500 index was down 23.89 points at 6,846.51, while the Nasdaq composite was down 32.22 points at 23,545.90.
The Canadian dollar traded for 72.27 cents US compared with 72.15 cents US on Friday.
The January crude oil contract was down US$1.20 at US$58.88 per barrel. The February gold contract was down US$25.30 at US$4,217.70 an ounce.
— With files from The Associated Press