S&P/TSX gains 100 points, U.S. markets mixed ahead of inflation reports

TORONTO — Broad-based strength led by base metals helped Canada’s main stock index gain more than 100 points on Tuesday, while U.S. markets muddled to a mixed close ahead of highly anticipated inflation data coming this week. 

Markets continued in their holding pattern ahead of an action-packed Wednesday that will see fresh data on inflation for the U.S. and an interest rate decision from the Bank of Canada. 

The S&P/TSX composite index closed up 101.48 points at 22,361.78.

In New York, the Dow Jones industrial average was down 9.13 points at 38,883.67. The S&P 500 index was up 7.52 points at 5,209.91, while the Nasdaq composite was up 52.68 points at 16,306.64.

Wednesday’s U.S. consumer inflation report, plus more inflation data later in the week, will give more data points for the U.S. Federal Reserve to consider as it weighs when to start cutting its overnight rate. 

“Everybody’s hanging on (the inflation report) because everybody wants to know, which way is the Fed going?” said John Zechner, chairman and lead equity manager at J. Zechner Associates.

Markets have pared back their expectations for how many times the central bank could cut this year to three, but even that may be a lofty goal, said Zechner. 

“If these inflation numbers stay high, and the economy stays pretty good, you could be looking at two, one or no rate cuts,” he said. 

The Fed “wants to cut,” he said, but is concerned about reigniting inflation. 

The Bank of Canada isn’t expected to start cutting its rate on Wednesday, said Zechner, and he doesn’t think it will shift from the hawkish rhetoric it’s been giving out. Despite Canada’s economy being much weaker than the U.S., inflation is proving stubborn.

“It’s a long path back to two per cent (inflation), and it’s taking longer than maybe they expected,” Zechner said. 

Rising commodity prices like energy and gold pose an additional risk to inflation, he added.  

However, the strength in commodities has been helping Canadian markets “play catch-up,” he said. 

On Friday, U.S. banks will kick off earnings season. Earnings expectations have come down since the start of the year, said Zechner, despite the months-long rally in equities, so earnings season will be a “litmus test” to see whether companies can back up those gains. 

The commentary from the banks on things like loan loss provisions will be important, he added. 

The Canadian dollar traded for 73.65 cents UScompared with 73.63 cents US on Monday.

The May crude oil contract was down US$1.20 at US$85.23 per barrel and the May natural gas contract was up three cents at US$1.87 per mmBTU.

The June gold contract was up US$11.40 at US$2,362.40 an ounceand the May copper contract was up one cent at US$4.29 a pound.

— With files from The Associated Press

This report by The Canadian Press was first published April 9, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD) 

Rosa Saba, The Canadian Press