Canada’s main stock index pulled back on Tuesday from a record high after domestic inflation data reduced prospects of Bank of Canada interest rate cuts and U.S. bank earnings led to volatile trade.
The S&P/TSX composite index ended down 144.71 points, or 0.5 per cent, at 27,054.14, after posting a record closing high on Monday.
Wall Street opened the second-quarter earnings season on a somber note, with banking stocks whipsawing in volatile trade. The Dow Jones Industrial Average fell 436.36 points, or 0.98 per cent, to 44,023.29, and the S&P 500 lost 24.80 points, or 0.40 per cent, to 6,243.76.
JPMorgan Chase slipped 0.7 per cent despite raising its 2025 net interest income outlook, while Wells Fargo fell 5.5 per cent even as its profit rose on reduced loan-loss reserves. BlackRock notched a new milestone for assets under management, yet its shares slid 5.9 per cent. Bucking the trend, Citigroup climbed 3.7 per cent to its highest finish since the global financial crisis, after its traders delivered a windfall that boosted second-quarter profit.
“We’re seeing profit-taking against the news because we’ve seen markets run up so hard for three months,” said Colin Cieszynski, chief market strategist at SIA Wealth Management.
“With the U.S. banks down, it’s dragging on the Canadian banks, especially because some of the Canadian banks have large U.S. operations.”
The financials sector, which accounts for 33 per cent of the TSX’s weighting, fell 0.6 per cent. Eight of the TSX’s 10 major sectors ended lower.
“Canadian inflation doesn’t help here either because it suggests the Bank of Canada may not be able to cut much further,” Cieszynski said.
Canada’s annual inflation rate rose to 1.9 per cent in June from 1.7 per cent in May and CPI-median, one of the core measures of inflation closely tracked by the BoC, rose to 3.1 per cent from 3 per cent.
Money markets have largely priced out the chances of a rate cut at the BoC’s next policy decision on July 30 in response to the inflation data as well as stronger-than-expected jobs data on Friday. The energy sector lost 0.9 per cent as the price of oil settled down 0.7 per cent at $66.52 a barrel.
In contrast to other indices, he Nasdaq Composite posted its latest record finish on Tuesday, supported by a jump in shares of heavyweight Nvidia. The tech-heavy index gained 37.47 points, or 0.18 per cent, to finish at 20,677.80.
It was the fourth session in five that the technology-heavy Nasdaq index has posted a record close, and the eighth time since June 27. Artificial-intelligence chip leader Nvidia was the primary factor behind the Nasdaq’s increase, gaining 4 per cent after it unveiled plans to resume sales of its H20 AI chip to China.
The news buoyed other chipmakers, with Advanced Micro Devices and Super Micro Computer both gaining more than 6.4 per cent.
The semiconductor index also advanced 1.3 per cent to its highest point in a year, while the S&P technology index climbed by the same percentage to hit a record high.
Rob Swanke, senior investment research analyst at Commonwealth Financial Network, said the Nvidia news meant that some investors, who had moved into other stocks due to technology’s high valuations, were rotating back.
“I would probably say it’s a one-day pop,” he added, noting that investors would be waiting for sales to be reflected in its earnings.
This week was expected to be a significant test of that improving sentiment, with the start of second-quarter earnings season and inflation reports that were forecast to reflect sellers starting to pass on higher tariff-related costs. The first of these reports showed U.S. consumer prices posted their biggest jump in five months in June, hinting that tariffs may be starting to heat up inflation. Still, underlying inflation stayed moderate, offering some reassurance despite the headline spike.
“The picture from inflation this morning, coming in a little bit higher than expected but pretty much in line, gives you some sense that the tariffs are starting to flow through into the economy,” said Commonwealth’s Swanke.
On the first day of second-quarter earnings season, banking stocks whipsawed in volatile trade.
- Reuters