Technology Is the rate hike bad news for these 3 stocks?

22:06  12 july  2018
22:06  12 july  2018 Source:   fool.com

Inflation rate holds steady at 2.2% in May despite soaring gasoline prices

  Inflation rate holds steady at 2.2% in May despite soaring gasoline prices The cost of living increased at a 2.2 per cent annual pace last month, matching the increase seen a month earlier, but well short of what economists had been expecting.Statistics Canada reported Friday that all eight components it tracks to come up with the consumer price index were higher during the month, but more than half of them grew by a slower rate than they did in April.

Canadian Pacific Railway Limited (TSX:CP)(NYSE:CP) and other companies sensitive to foreign exchange fluctuations may not be welcoming another rate hike .

A rate hike on Wednesday marks the central bank’s seventh since the end of 2015. However, what may be more important for housing market watchers is the Rates rose 15 out of the first 21 weeks of this year, the largest share since at least 1972. Higher mortgage rates could also exacerbate the

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The Bank of Canada elected to raise the benchmark rate to 1.5% on July 11 — a move that was expected by odds makers and analysts alike. The Canadian dollar predictably rose after the decision was announced, but this was short lived. The United States announced another round of crippling tariffs on China — this time totaling $200 billion — that will likely be officially imposed by the end of the summer. To add to this, President Trump struck an antagonistic tone at the NATO meetings.

Renewed trade tensions and calls for further protectionism pushed up the U.S. dollar, which, in turn, dragged down the Canadian dollar. Governor Stephen Poloz said that there would likely be one more rate hike in 2018, but he also urged caution due to this recent bout of protectionism. Experts forecast that the central bank will leave rates unchanged until a key October meeting.

TSX ends at record high on energy rally

  TSX ends at record high on energy rally TSX ends at record high on energy rallyThe August crude contract closed up $3.04 or 4.64 per cent at US$68.58 after OPEC agreed to an increase in production that was both lower than expected and somewhat light on specifics, said Macan Nia, senior investment strategist at Manulife Investments.

Higher interest rates are supposed to be bad for stocks . But are they now? On Wednesday, the Federal Reserve raised its benchmark rate for the third time in this They include Minneapolis Fed President Neel Kashkari, who was the sole Fed member who voted against the March rate hike .

Importantly, the FOMC signaled that there would be just three rate hikes in 2018, the same number That said, the Fed announced it is increasing its 2019 projection from two rate hikes to three , and is Searching for stocks to buy in a recession? These seven companies thrived despite 2008's market

The rate hike may not have been welcomed initially by the companies we will go over today, but continued weakness in the Canadian dollar is not necessarily bad news. Let’s take a look at three stocks investors may want to add after the rate hike today.

Canadian Pacific Railway Limited (TSX:CP)(NYSE:CP)

CP Rail stock was up 1% as of early morning trading on July 12. Shares have climbed 5% in 2018 so far. The company is set to release its second-quarter results on July 18. In the first quarter, revenue rose 4% to $1.66 billion, and the operating ratio rose 510 basis points to 67.5%.

For its 2018 full-year guidance, CP Rail projected the Canadian-U.S. dollar exchange rate to be in the range of $1.25-1.30, while also forecasting an effective tax rate between 24% and 25%. CP Rail and other rail and freight companies have experienced complications with the high Canadian dollar in 2017. Trade tensions are hardly good news, but a higher U.S. dollar should alleviate some pressure going forward.

Bank of Canada caught between rate hike and trade war

  Bank of Canada caught between rate hike and trade war Bank of Canada caught between rate hike and trade warWhile another interest rate increase seemed a sure thing on May 30 - when the central bank dropped oft-repeated language pledging a cautious approach to setting monetary policy - attacks on Canadian trade policy by U.S. President Donald Trump dimmed the economic outlook within days.

After years of ever-cheaper credit, the Bank of Canada is finally making it harder for Canadians to take on debt by raising the key interest rate . You're viewing YouTube in Russian. You can change this preference below.

" Hikes are generally bad for stocks , somewhat bad for the US dollar, and bullish for 10-year yields," Nautilus Investment Research said. Higher interest rates are generally viewed as bad for the stock market. And with the Federal Reserve announcing its third rate hike since December 2015, stocks

Canadian National Railway (TSX:CNR)(NYSE:CNI)

Canadian National Railway stock was up 0.96% in morning trading on July 12. Shares are up 7% in 2018 so far. The company is set to release its second-quarter results on July 24.

In the first quarter, Canadian National Railway saw net income drop 16% year over year to $741 million, while diluted earnings per share fell 14% to $1.00. Canadian National Railway sees a large portion of its revenues and expenses denominated in U.S. dollars. The fluctuation of the Canadian dollar was a drag on earnings, and the company said net income would have been $24 million higher, or $0.03 per share, without this issue.

Stella-Jones Inc. (TSX:SJ)

Stella-Jones sells lumber and wood products with a bulk of its customers for utility poles located in the United States. A weak Canadian dollar has historically been a positive for the company. Shares dipped on July 11, and the stock was up a slight 0.19% in morning trading on July 12. The stock is down 5.9% in 2018, but shares are up 8.6% year over year.

Bank of Canada expected to resume tightening key interest rate Wednesday

  Bank of Canada expected to resume tightening key interest rate Wednesday The Bank of Canada is widely expected to boost a key interest rate on Wednesday as it resumes efforts to "wean" the economy off low borrowing costs. The bank's target for the overnight rate — what major financial institutions charge each other for one-day loans —   has been at 1.25 per cent since mid-January. Since then, the bank has stood firm on three subsequent rate announcements. That string is generally expected to end this week. As of Tuesday, the implied probability of a rate hike to 1.5 per cent stood at just over 96 per cent, according to Bloomberg.

"Temporarily, good news may be bad news for the stock market," Price says. The big change in the market mentality is the fear that borrowing rates , which Investors must take the bad week in stride, as business conditions remain healthy and company earnings are expected to benefit this year from

However, rate hikes are rarely ever good news for precious metals like gold and silver, or the Translation: Things might not be as bad for the gold and silver market as previously advertised. Having a dissenting opinion this early in the rate - hike cycle could imply that the Fed's march to its

All three stocks should benefit from a dovish turn from the Bank of Canada, and trade tensions were able to mitigate the gains the Canadian dollar experienced in the immediate aftermath.

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Fool contributor Ambrose O’Callaghan has no position in any of the stocks mentioned. David Gardner owns shares of Canadian National Railway. The Motley Fool owns shares of Canadian National Railway. Canadian National Railway is a recommendation of Stock Advisor Canada.

BoC rate hike has both pros and cons .
The Bank of Canada's latest interest rate hike means higher borrowing costs for consumers with variable-rate mortgages, loans or lines of credit, but it is also good news for savers and future homeowners. The decision to increase its benchmark interest rate to 1.5 per cent on Wednesday prompted all of Canada's Big Six banks to raise their prime rates, thereby passing the rate increase along to their customers.

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