Canada's main stock index gained over 100 points on Tuesday, boosted by the strength of various base metals. stock index On Tuesday, the S&P/TSX gained more than 100 points, while U.S. markets closed with mixed results as everyone waited for upcoming inflation data.
The markets continued to stay cautious as they awaited important data on U.S. inflation and an interest rate decision from the Bank of Canada scheduled for Wednesday.
The S&P/TSX composite index finished at 22,361.78, showing an increase of 101.48 points.
In New York, the Dow Jones industrial average closed with a decrease of 9.13 points at 38,883.67. The S&P 500 index rose by 7.52 points to 5,209.91, and the Nasdaq composite gained 52.68 points, reaching 16,306.64.
The U.S. consumer inflation report on Wednesday, along with additional inflation data later in the week, will provide more information for the U.S. Federal Reserve to consider as they decide when to reduce their overnight rate.
According to John Zechner, chairman and lead equity manager at J. Zechner Associates, everyone is eagerly anticipating the inflation report to understand the Federal Reserve's future actions.
Zechner stated that the markets have adjusted their expectations for how many times the central bank might cut rates this year to three, but he believes even that might be too optimistic.
He explained that if inflation remains high and the economy continues to perform well, there might be fewer rate cuts, or even none at all.
Zechner indicated that the Federal Reserve wants to decrease rates, but they are worried about reigniting inflation.
Zechner mentioned that the Bank of Canada is not anticipated to initiate rate cuts on Wednesday, and he doesn't foresee a shift from the hawkish stance it has been presenting, despite the Canadian economy being weaker than the U.S. economy and facing persistent inflation.
Zechner commented that reaching the two percent inflation target is a challenging process that's taking longer than expected.
He also added that rising commodity prices like energy and gold pose an additional risk to inflation.
However, he noted that the strength in commodities has been aiding Canadian markets to catch up.
Zechner mentioned that U.S. banks will kick off earnings season on Friday, and despite the months-long equity rally, earnings expectations have decreased since the beginning of the year. He sees this earnings season as a test to validate those gains.
He also emphasized the importance of the banks' commentary on aspects like loan loss provisions.
The Canadian dollar was traded for 73.65 cents US compared with 73.63 cents US on Monday.
The May crude oil contract dropped by US$1.20, reaching US$85.23 per barrel, while the May natural gas contract increased by three cents, reaching US$1.87 per mmBTU.
The June gold contract rose by US$11.40, reaching US$2,362.40 an ounce, and the May copper contract increased by one cent, reaching US$4.29 a pound.
— With files from The Associated Press
