TORONTO — Strength in base metal stocks helped Canada's main stock index gain more than 100 points Tuesday ahead of the upcoming Bank of Canada interest rate decision, while U.S. markets were mixed as earnings reports continued to roll in.
The S&P/TSX composite index closed up 110.29 points at 21,034.59.
In New York, the Dow Jones industrial average was down 96.36 points at 37,905.45. The S&P 500 index was up 14.17 points at 4,864.60, while the Nasdaq composite was up 65.66 points at 15,425.94.
Markets meandered to a mixed end on Tuesday, without a single catalyst driving equities up or down, said Philip Petursson, chief investment strategist at IG Wealth Management.
Earnings season in the U.S. is still getting underway, said Petursson, and investors are waiting for the bigger companies to report later in the week.
“Coming through the first three quarters of last year, we did see weaker earnings on a year-over-year basis and the expectation was that we would start to see a recovery in the fourth quarter,” he said.
“And I think that’s what the markets are leaning on right now, waiting for that confirmation that yes, we have turned the corner on earnings and earnings growth is going to resume starting with the fourth quarter and going through the remainder of 2024.”
There’s a general belief that the U.S. is in for a soft landing, said Petursson, even though he says the evidence is still not quite solid enough.
“I think the market is just kind of searching for direction,” he said.
The Bank of Canada is set to hold its key interest rate steady on Wednesday, said Petursson, but he expects the central bank’s messaging could shift toward more certainty that monetary tightening is over and inflation is on the right path.
“I think the bank will also acknowledge some of the weakness in the Canadian economy, and that will support the view towards rate cuts coming later this year.”
In the U.S., markets have pared back expectations for when and how much the U.S. Federal Reserve could cut rates in 2024.
But Petursson thinks those expectations are still too aggressive.
“I think the market is — within fixed income, anyway — pricing in the best-case scenario.”
He thinks the reality will be closer to the Fed’s projection of three cuts in 2024.
The Canadian dollar traded for 74.19 cents US compared with 74.33 cents US on Monday.
Oil prices are lower than one might expect given the ongoing conflict in the Middle East, said Petursson, but he thinks that could change if the conflict worsens, or if the economic outlook gets stronger.
“I think oil prices are a coiled spring right now.”
The March crude oil contract was down 39 cents at US$74.37 per barrel and the March natural gas contract was up four cents at US$2.17 per mmBTU.
The February gold contract was up US$3.60 at US$2,025.80 an ounceand the March copper contract was up three cents at US$3.79 a pound.
This report by The Canadian Press was first published Jan. 23, 2024.
Companies in this story: (TSX:GSPTSE, TSX:CADUSD)
Rosa Saba, The Canadian Press
