Tuesday was quite a negative day in the markets after U.S. core inflation came in hotter than expected. This means that interest rate cuts are not likely to happen as soon as was hoped.
The S&P 500 was down 1.4% and Toronto was down 2.3%.
Investors should not be shocked by the decline today. Markets have been doing extremely well of late and so a pull-back is no surprise.
Shopify was down 12.5% after releasing earnings with a weaker than hoped for outlook.
The U.S. inflation report also pushed bond interest rates up.
The Canadian 5 year government bond rose 12 basis points to 3.83%. That seems likely to push up the rate for 5 year mortgages.
This is also definitely negative for perpetual preferred shares. Those have given us good gains lately but it seems likely that some of those gains will now be given back. Rate reset preferred shares tend to be harder to predict. The Canadian Western Bank rate reset CWB.PR.B that will reset on April 30 has risen sharply to $20.95 in recent months. I’m tempted to reduce my position but then again it’s possible (although probably unlikely) that they would decide to redeem this at $25 on April 30. These shares were issued in 2014. It’s possible that with changing bank capital rules they are no longer as useful to the bank. CWB also has CWB.PR.D that will reset on April 30. That one would have a very high interest rate upon renewal and therefore I am relatively certain that it will be redeemed at $25.
Toll brothers was down 5.1%.