Canadian stocks plunge following US Fed rate hike

Canada's main stock market in Toronto suffered its worst single-day decline in five weeks after the Federal Open Market Committee (FOMC) confirmed that it would raise interest rates for the second time in a decade.

After reaching a 19-month high on Tuesday, the Toronto Stock Exchange's benchmark Standard & Poor's/TSX Composite slipped 188.09 points, or 1.22 percent, to finished the session at 15,197.18 points. All 10 sub-sectors lost ground during the day.

As expected, FOMC announced that interest rates would increase by 0.25 percentage points to a range between 0.50 percent and 0.75 percent. In addition, the committee anticipates forecasts that there will be three interest rate hikes in 2017, up from two previously.

Josh Nye, Economist at Royal Bank of Canada, believes two interest rate hikes are more likely.

"The main takeaway from today's meeting is that the Fed continues to see a gradual pace of tightening next year even as the unemployment rate is expected to fall further below longer run levels," Nye wrote in a report.

"Our forecast assumes the current tightening cycle will remain slow by historical standards with another two rate hikes expected in 2017. Unless Congress and the Trump administration can come to an agreement on effective fiscal stimulus relatively quickly, we don't see the Fed deviating from a gradual path next year," he added.

During the trading session on Wednesday, Materials and Energy groups were hit the hardest by news of the hike, dipping 2.77 percent and 2.28 percent, respectively.

Materials slumped as price of gold sank 15.30 dollars to a 10-month low of 1145.70 U.S. dollars an ounce. Since the beginning of November, the price of the rare metal has dropped 12.42 percent.

Barrick Gold Corporation, the world's largest producer of gold, fell 5.42 percent to 19.54 Canadian dollars (14.72 U.S. dollars). Meanwhile, Toronto-based gold miners Yamana Gold Inc. and B2Gold Corp. slipped 5.09 percent and 5.10 percent respectively.

Energy subgroup was affected by the news and also concerns of oversupply of crude oil after U.S. Energy Information Administration reported mixed inventory figures. Price of Brent crude oil for February delivery slipped 3.22 percent to 53.81 U.S. dollars a barrel.

As a result, Calgary-based energy makers Baytex Energy Corp., Encana Corporation, and Spartan Energy saw respective percentage declines of 7.94, 3.73, and 2.34.

Other groups to lose ground were Health Care (2.08 percent), Information Technology (1.32 percent), Industrials (1.14 percent), Telecommunications (0.92 percent), Consumer Discretionary (0.76 percent), Utilities (0.65 percent), Consumer Staples (0.61 percent), and Financials (0.53 percent).

The Canadian dollar ended a run of five straight day of gains, as it fell 0.0082 to 0.7534 U.S. dollars. Endit