Stock markets finish flat as Fed keeps key interest rate unchanged

TORONTO – A decision by the U.S. Federal Reserve to stand pat as expected on its key interest rate did little to move North American stock markets during a relatively quiet trading session Wednesday.

In Toronto, the S&P/TSX composite index was ahead 16.43 points at 15,402.39, with the biggest gains coming from the metals and materials sectors.

The loonie was at 76.65 cents US, down 0.20 of a U.S. cent.

On the corporate front, shares in Canada’s largest uranium company plunged more than 11 per cent after announcing it was at risk of losing a multi-year contract with Tokyo Electric Power worth more than $1.3 billion.

The Japanese company is seeking to kill the deal with Cameco Corp. (TSX:CCO), saying that regulations arising from the 2011 Fukushima disaster have prevented the operation of its nuclear plants.

Shares in Saskatoon-based Cameco fell by $1.87 to $14.70 on the Toronto Stock Exchange.

On Wall Street, investors seemed unfazed after the Fed announced it was keeping its key interest rate unchanged between a 0.5 to 0.75 per cent range — a move that was widely expected.

The central bank also conveyed a slightly more optimistic tone about the U.S. economy. It noted the job market was getting stronger and inflation was gradually rising, but added that it wanted more time to monitor the economy before it hiked rates again.

Last month, the Fed modestly raised its benchmark short-term rate for the first time since December 2015 after keeping the rate at a record low near zero for seven years.

It also forecasted there will likely be at least three more rate hikes this year. The Fed had driven down its key rate to help rescue the banking system and energize the economy after the 2008 financial crisis.

Laura Lau, a senior portfolio manager at Brompton Group, said the markets are unsure if that schedule will stay in place due to the uncertainty surrounding how U.S. President Donald Trump’s incoming policies on trade, tax reform and health care will influence the economy.

“The Fed is still in a wait-and-see mode to see what happens with Trump,” she said. “But all (economic) signs do say that they should be looking at another hike.”

Lau said the markets anticipate a rate hike can come as early as May, with most predicting a June increase if all the data points from now until then show that employment and consumer sentiment is continuing to thrive.

The central bank will have to time its next hike properly or run into risks, she added.

“If they take too long, the economy can get overheated and there could be more inflation.”

A survey released by payroll services provider ADP on Tuesday showed that private employers added far more jobs than expected in January. The gain of 246,000 jobs was the most in a single month since June and spread out in various sectors including construction, manufacturing and health care.

In New York, the Dow Jones industrial average was up 26.85 points at 19,890.94 and the S&P 500 was flat with an uptick of 0.68 of a point at 2,279.55. The tech-heavy Nasdaq composite gained 27.86 points at 5,642.65.

In commodities, the March crude contract advanced $1.07 at US$53.88 per barrel and March natural gas was up five cents at US$3.17 per mmBTU.

The April gold contract was down $3.10 at US$1,208.30 an ounce and March copper dropped two cents at US$2.71 a pound.

— With files from The Associated Press

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