Canadian dollar, North American stock markets steady ahead of Fed announcement

The Federal Reserve’s decision on Thursday to keep short-term rates steady sparked the latest round of selling. “What struck me about [the Fed’s statement] was the reference to what was going on globally”.

PLANE PROBLEMS: Aviation equipment manufacturer Rockwell Collins slumped after the company’s sales forecast for next year came in lower than analysts’ forecasts.

Futures for the S&P 500 index dropped almost 5 points to 1,973.50, while those for the Nasdaq Composite slipped 13.3 points to 4,356.50. The S&P 500 fell 32.19 points, or 1.6%, to 1,958.02 and ended the week 0.2% lower.

The Dow is down 48.51 points, or 0.3 percent. Telecoms got hit, while utilities and energy care stocks led gains. Suncor Energy Inc dropped 2.3 percent to C$34.31, and Canadian Natural Resources Ltd declined 2.7 percent to C$27.20. “The stock market always hates uncertainty”. Volume was sharply higher across the board, due partly to quadruple witching, as options and futures contracts expired.

“The decision of raising or delaying is so close to call, that has resulted in contradicting trades over the past few days”, said Michael Arone, chief investment strategist at State Street Global Advisors’ U.S. Intermediary Business. Many investors felt a rate rise would have signaled the central bank’s optimism about economic growth.

“The key for future market action depends largely on whether or not the Fed had any good cause to worry about global developments”, Wieting said. Earlier in the week, oil prices had rallied after an unexpectedly large drop in crude stockpiles.

The Fed kept its policy interest rate unchanged, showing reluctance to end an era of record monetary stimulus in a time of market turmoil, rising worldwide risks and slow inflation at home. Many had been anxious about a return to normal after years of rock-bottom rates.

The Stoxx Europe 600 was recently trading 1.7% lower, putting it on track for its worst day in two weeks.

Stocks sank deeper into the red in the final hour of trading Friday after giving up a midday attempt to pare losses.

“I think the market would have liked to have seen an interest rate increase in the sense it would have basically put a lot of weight behind the conviction that the USA economy was doing well enough to support an interest rate increase“, Watson said. The Fed meets again next month and in December.

The Fed’s decision suggested a global economic environment that is unlikely to foster the kind of earnings growth needed to support stocks at their current, above-average valuations.