Canada’s main stock index fell on Tuesday as recent volatility in commodity-linked stocks spooked investors, offsetting domestic inflation data that could forestall a shift to interest rate hikes by the Bank of Canada.
The S&P/TSX Composite Index ended down 177.16 points, or 0.5%, at 32,896.55 after clawing back much of its earlier declines. Wall Street’s major indexes bounced back to end slightly positive after a negative start to the session.
The materials sector, which includes metal mining shares, declined 2.5%. The price of gold remained volatile, falling more than 2%, as signs of progress in U.S.-Iran talks dampened safe-haven demand, while a stronger dollar added to the selling pressure.
Energy also lost ground, falling 0.7%, as the price of oil settled 0.9% lower at $62.33 a barrel.
Still, most major sectors ended higher, including consumer discretionary and industrials which added 1.1% and 0.7%, respectively.
Investors see a roughly 40% chance the BoC will cut interest rates further this year after data showed that Canada’s annual inflation rate slowed to 2.3% in January. Earlier this month, the market was leaning toward the next move in rates being a hike.
“The details of the report largely reinforce our long-held view - now priced by markets - that the BoC is likely on hold, with risks skewed more toward easing than hiking,” Michael S Hanson and Bennett Parrish, analysts at J.P. Morgan, said in a note.
On Wall Street, technology shares rebounded from earlier lows and financial stocks also provided support.
After dropping as much as 1.5% at its lows of the session, the S&P 500 information technology sector erased declines to close up 0.5% as gains in Nvidia and Apple overcame declines in Microsoft and Oracle.
Worries about artificial intelligence disrupting business models had sparked a selloff in software firms, brokerages and trucking companies the previous week, leading to Wall Street’s three main indexes to record their biggest weekly decline since mid-November.
“There’s a lot of different trends going on in terms of where investors want to put money right now and you see that in this market where you just see spikes up and spikes down, on maybe not a daily basis, but on a regular basis,” said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York.
“The market is looking very short-term here and there will be a return to AI plays being very much in favor.” Potential risks from Chinese AI players exacerbated the uncertainty. On Monday, Alibaba unveiled a new AI model, Qwen 3.5, designed to independently execute complex tasks.
Even with the rebound in technology names, software stocks remained under pressure, with the S&P 500 software index ending down 1.6% with Intuit and Cadence Design the worst-performing in the index on the day with declines of more than 5%.
The Dow Jones Industrial Average rose 32.26 points, or 0.07%, to 49,533.19, the S&P 500 gained 7.05 points, or 0.10%, to 6,843.22 and the Nasdaq Composite gained 31.71 points, or 0.14%, to 22,578.38.
The S&P 500 financials index was among the best-performing of the 11 major S&P sectors on the day. Gains in banks such as Goldman Sachs and JPMorgan Chase helped nudged the Dow into positive territory from a decline of 0.7% earlier in the session. Consumer staples, down 1.5%, was the worst-performing S&P 500 sector on the session, dragged lower by a 7% tumble in General Mills after the cereal maker cut its annual core sales and profit forecasts.
This week, the personal consumption expenditure report - the U.S. Federal Reserve’s preferred inflation gauge - will be in focus for insights into inflation and how it could impact the central bank’s rate-cut trajectory. The data follows cooler-than-expected consumer inflation data last week that slightly raised bets on interest-rate cuts this year.
Traders are pricing in a chance of roughly 63% for a rate cut of at least 25 basis points at the Fed’s June meeting, the first with odds above 50%.
Chicago Fed President Austan Goolsbee said Tuesday that the Fed could approve “several more” interest-rate cuts this year if inflation resumes a decline to the central bank’s 2% target, while Governor Michael Barr said that another central bank interest rate cut could come somewhere well down the road amid ongoing risks to the U.S. inflation outlook. In addition, San Francisco Fed President Mary Daly said the central bank must do a deep dive into the data to determine whether AI is lifting productivity growth and in turn, economic growth, without rekindling inflation that would force tighter monetary policy.
Among U.S. stocks, Norwegian Cruise Line shares rallied 12.1% as the best performer on the S&P 500, after activist investor Elliott said it had built a more than 10% stake in the cruise operator.
Fiserv’s shares jumped 6.9% after the Wall Street Journal reported that activist investor Jana Partners had taken a stake in the payments company.
Masimo shot up 34.2% after Danaher said it would acquire the pulse-oximeter maker for $9.9 billion, including debt, sending Danaher shares 2.9% lower.
Advancing issues outnumbered decliners by a 1.02-to-1 ratio on the NYSE while declining issues outnumbered advancers by a 1.07-to-1 ratio on the Nasdaq. The S&P 500 posted 42 new 52-week highs and 10 new lows while the Nasdaq Composite recorded 81 new highs and 224 new lows. Volume on U.S. exchanges was 17.76 billion shares, compared with the 20.7 billion average for the full session over the last 20 trading days.
Reuters, Globe staff