Canada’s main stock index edged down on Tuesday as declines for resource shares outweighed Bank of Nova Scotia earnings beating expectations and optimism around expected U.S. interest rate cuts.
Toronto’s main stock index ended down 52.50 points, or 0.2 per cent, at 31,049.28, extending its pullback from a record closing high on Friday.
“I think that a correction was required and is healthy and may not be complete,” said Joseph Abramson, co-chief investment officer at Northland Wealth Management.
“The real point is we remain constructive on risk assets. Growth remains positive, liquidity is being added and there might be a substantial amount of liquidity added.”
The Bank of Canada has signaled that its easing campaign is on hold but the Federal Reserve has left the door open to additional interest rate cuts. Investors expect about 90 basis points of easing from the U.S. central bank by the end of next year.
“Within that world, the U.S. dollar goes down which could pressure the Canadian dollar up, and gold would do well as well as some other commodities,” said Abramson.
Resource shares account for 34 per cent of the Toronto market’s weighting.
The materials group, which includes metal mining shares, fell 1.8 per cent on Tuesday as gold and copper prices declined.
Oil prices also fell, settling 1.15 per cent lower at $58.64 a barrel, which weighed on energy. The sector was down 1.6 per cent.
Financials were a bright spot, rising 0.7 per cent, as Bank of Nova Scotia kicked off bank earnings season on a positive note. Shares of Scotiabank were up 2.8 per cent, notching a record high. Laurentian Bank shares jumped 18.4 per cent after Fairstone Bank said it would buy the lender.
Technology added 0.3 per cent, with e-commerce company Shopify Inc up 4.9 per cent after the company said merchants achieved record sales over the Black Friday to Cyber Monday weekend, jumping 27 per cent from last year.
U.S. stocks closed higher to record their sixth gain in seven sessions in muted trading on Tuesday, buoyed by gains in technology shares as expectations the Federal Reserve will cut interest rates next week remain elevated.
Equities declined on Monday amid soft data on the manufacturing sector, a jump in U.S. Treasury yields as Japanese bond yields surged, and a drop in bitcoin and crypto-related stocks. But with a dearth of economic data for the session, the rise in bond yields eased and bitcoin rebounded, which enabled stocks to recover somewhat as the focus shifted to the Fed.
“It’s possible that both of those things are adding a little bit of volatility to the market at a time when there’s kind of a catalyst vacuum until the Fed,” said Ross Mayfield, investment strategist at Baird in Louisville, Kentucky.
“On the flip side, it seems like largely you can take away positive consumer read-throughs on some of these Black Friday, Cyber Monday, data points. I’m more content or happier to see the strength in the consumer versus some of these things happening under the surface with yields and bitcoin. Those are things that will pass.”
The Dow Jones Industrial Average rose 185.13 points, or 0.39 per cent, to 47,474.46, the S&P 500 gained 16.74 points, or 0.25 per cent, to 6,829.37 and the Nasdaq Composite gained 137.75 points, or 0.59 per cent, to 23,413.67.
Boeing shot up 10.1 per cent as the biggest boost to the Dow, accounting for roughly 117 points to the upside, after the planemaker forecast higher deliveries for its 737 and 787 jets next year. Boeing also lifted the S&P 500 industrials index 0.9 per cent, making it the best performing of the 11 major S&P sectors.
Also higher was tech, which rose 0.8 per cent, fueled by gains in megacaps Apple, Nvidia and Microsoft of about 1 per cent each, while Intel shares jumped.
Recent data has pointed to a gradually cooling economy, and policymakers had urged caution on rate cuts, warning that inflation pressures could be rekindled. But comments from several Fed officials in recent days sent market expectations soaring for a rate cut at the central bank’s December meeting.
Expectations for a rate cut of 25 basis points at the Fed meeting are at 89.2 per cent, according to CME’s FedWatch Tool, up from 63 per cent a month ago.
Friday’s release of the Personal Consumption Expenditures Index, the Fed’s preferred inflation gauge, could further solidify expectations for the central bank’s policy call next week.
Markets were also eyeing who may succeed Fed Chair Jerome Powell when his term ends next year, with reports suggesting White House economic adviser Kevin Hassett is a top contender. Trump said on Tuesday he would announce his selection early next year.
On the downside, Procter & Gamble declined 1.1 per cent after the consumer packaged goods company flagged a hit from the U.S. government shutdown.
Warner Bros Discovery climbed 2.8 per cent after reports said it received a second round of bids, including an offer from Netflix .
Crypto stocks advanced, including Strategy, up 5.8 per cent, and Coinbase, up 1.3 per cent, as bitcoin prices rebounded after its largest dollar loss since May 2021 in the previous session.
Advancing issues outnumbered decliners by a 1.01-to-1 ratio on the NYSE, while on the Nasdaq, declining issues outnumbered advancers by a 1.07-to-1 ratio.
The S&P 500 posted 11 new 52-week highs and three new lows while the Nasdaq Composite recorded 70 new highs and 100 new lows.
Volume on U.S. exchanges was 15.35 billion shares, compared with the 18.42 billion average for the full session over the last 20 trading days.
Reuters