Canada’s main stock index fell for a second straight day on Tuesday as technology and real estate shares lost ground, but the decline was restrained ahead of an expected supersized interest rate cut by the Bank of Canada.
The S&P/TSX composite index ended down 121.09 points, or 0.5%, at 25,504.33, extending its pullback from a record closing high on Friday.
Wall Street’s main indexes also ended lower as investors awaited a U.S. inflation report on Wednesday.
The TSX has added 21.7% since the start of 2024, including 16.6% since mid-year.
“We’ve had a great run, particularly in the TSX in the last, call it, six months,” said Sadiq Adatia, chief investment officer at BMO Asset Management. “This is people looking at markets, taking some gains.”
The Bank of Canada will slash interest rates by a half percentage point at a second consecutive meeting on Wednesday, according to a majority of economists polled by Reuters, many of whom changed their view on news of a sharp rise in unemployment.
“I think it’s important for them to continue to be aggressive on rate cuts to help fuel the Canadian economy,” Adatia said. “It would be a sign that consumers are going to spend, helping drive earnings for corporations.”
The consumer discretionary sector added 0.3%, the only one of 10 major sectors to notch gains.
The technology sector fell 1.2%, with e-commerce company Shopify down 1.6%. Real estate lost 0.9%, its fourth straight day of declines.
The Dow Jones Industrial Average fell 154.10 points, or 0.35%, to 44,247.83. The S&P 500 lost 17.94 points, or 0.30%, at 6,034.91 and the Nasdaq Composite fell 49.45 points, or 0.25%, to 19,687.24.
Among the S&P 500′s 11 major industry sectors, only three ended with gains a day ahead of the November reading of the Consumer Price Index, one of the last major reports ahead of the Fed’s Dec. 17-18 meeting. Headline inflation is expected to have risen slightly in November to 2.7% from 2.6% in October. The Producer Price Index report will follow on Thursday.
“There’s a little bit of wait-and-see in the market ahead of the CPI and PPI data this week,” said Mona Mahajan, head of investment strategy at Edward Jones. “Markets want to see a number that won’t be too disruptive to the Fed next week.”
If the CPI comes in line with estimates, investors will expect an “all clear” for the Fed to lower rates by 25 basis points next week, she added.
Traders see an 86% chance for a cut next week, CME’s FedWatch Tool showed Tuesday. Bets had jumped after Friday’s news of an uptick in U.S. unemployment along with a rebound in job growth, which had slowed in October.
Market participants will be watching out for signs that the U.S. central bank will pause its easing cycle in January, after a host of Fed officials last week hinted at a slower pace of monetary policy easing on the back of a resilient economy.
Communication services, up 2.6%, was the biggest percentage gainer among S&P 500 sectors with help from a 5.6% rally in shares of Google-parent Alphabet after it unveiled a new chip.
The biggest percentage decliner was real estate, falling 1.6%. The S&P’s biggest index point drag was from technology, down 1.3%. It was weighed down by a 6.7% drop in Oracle shares after the cloud computing company missed Wall Street estimates for second-quarter results.
Adding pressure to technology, the Philadelphia semiconductor index fell 2.5% after China’s Monday announcement of an investigation into Nvidia over suspected violations of anti-monopoly law. The probe was widely seen as retaliation against U.S. curbs on China’s chip sector.
Shares in Walgreens Boots Alliance rallied 17.7%, making it the S&P 500′s biggest percentage gainer after reports that it is in talks to sell itself to private equity firm Sycamore Partners.
The S&P 500′s biggest percentage decliner was Moderna Inc , which fell 9.1% after BofA reinstated coverage of the company with an ‘underperform’ rating.
Alaska Airlines shares rose 13% after it raised its fourth-quarter profit forecast, while Boeing gained 5.5% after Reuters reported the planemaker restarted production of its 737 MAX jets last week.
Among individual stock movers, software firm MongoDB fell 16.9% despite raising its forecast for annual results.
In mid-caps, luxury homebuilder Toll Brothers shares fell 6.9% after its quarterly results beat expectations but its current quarter forecasts disappointed.
Declining issues outnumbered advancers by a 1.88-to-1 ratio on the NYSE where there were 117 new highs and 42 new lows. On the Nasdaq, 1,655 stocks rose and 2,671 fell as declining issues outnumbered advancers by a 1.61-to-1 ratio. The Nasdaq Composite recorded 87 new highs and 86 new lows while the S&P 500 posted 10 new 52-week highs and three new lows. On the volume side, on U.S. exchanges 13.35 billion shares change hands compared with the 14.35 billion average for the last 20 sessions.
Reuters, Globe staff