Market Watch: February 24

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U.S. equity markets finished higher on Thursday as investors await the personal consumption expenditures price index on Friday, which is the preferred inflation measurement of the U.S. Federal Reserve Board. By the end of trading, the Dow gained 109 points, while the S&P 500 and Nasdaq rose 21 and 83 points, respectively. In Canada, the TSX dropped 5 points, dragged down by the Materials sector.

continuing to improve

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Red Deer marks 2026 National Day of Mourning

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North American Indexes Lose Ground

For the three trading days covered in this report, the Dow lost 673 points to close at 33,154, the S&P 500 dropped 67 points to settle at 4,012, and the tech-heavy Nasdaq sunk 197 points to close at 11,590. In Canada, the TSX lost 327 points to end at 20,188.

Strategy

Slower-than-expected progress on inflation will bias the terminal rate upwards

Minutes from the Federal Open Market Committee’s (FOMC) Jan 31-Feb 1 meeting revealed that most officials favoured slowing the pace of rate hikes following larger moves in November and December. Some dissenters advocated for a half-point hike. Recently, two non-voting members – Loretta Mester of Cleveland and James Bullard of St. Louis – said that larger increases were still warranted to arrive at a sufficiently restrictive policy stance as soon as possible. Ms. Mester added that the Fed is not limited to quarter-point moves, but we think the bar to resume larger increases in the policy rate is high.

The minutes suggest the same, as officials judged that it would be “appropriate to take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.” At the time of this meeting, officials had revised their headline and core inflation forecast to 2.8 per cent and 3.2 per cent, respectively, both lower than the December projection. Data released since then has shown that progress on the inflation front had stalled in January, and data revisions for prior months indicate that the inflation decline was not as pronounced as initially reported. As such, we expect policymakers to revise their forecast for the terminal rate higher in the next set of economic projections that are due in March.

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