TSX roars back
RTGAM
A dramatic, sudden move by the U.S. Federal Reserve Tuesday in chopping its key funds rate by three-quarters of a percentage point to avert a recession sent the Toronto stock market surging and saved New York markets from the mauling experienced on other global indexes on Monday.
The Bank of Canada announced Tuesday that it, too, was cutting rates.
The central bank is cutting its key rate by a quarter-point to 4 per cent to help shield the Canadian economy from what many fear could be a full-blown recession in the U.S.
Toronto's S&P/TSX composite index surged 508.75 points to 12,640.88, led by a runup in the battered financial sector, clawing back most of Monday's staggering 605-point loss.
After a U.S. holiday Monday, New York's Dow Jones industrials came back from an early 457-point deficit, to close down just 128.11 points, or about 1 per cent, to 11,971.19.
That was far better than the 4 to 7 per cent tumbles experienced Monday by global markets.
But analysts cautioned about reading too much into the rate cuts and the effect on stock markets.
"The worry I have is the markets - given their performance in recent weeks and days - are clearly clamouring for, hoping for, an essentially easy and painless path back to asset price growth and general economic vigour," said David Wolf, head of Canadian economics and strategy at Merrill Lynch Canada.
"And I think what we're likely to find is, even if the Fed continues to cut aggressively, that it's simply not going to be enough to avoid recession and to reinvigorate growth in the near term. Even the Fed doesn't have a magic bullet out of this."
The TSX Venture Exchange was up 75.41 points to 2,465.93.
New York's Nasdaq composite index fell 47.75 points to 2,292.27 while the S&P 500 index moved down 14.69 points to 1,310.5. The Canadian Press
Copyright 2001 The Globe and Mail