U.S. and Canadian stocks took a breather on Wednesday, pausing a two-day rally, as the tenuous Israel-Iran cease fire continued to hold and investors pored over a second day of congressional testimony from Federal Reserve Chair Jerome Powell.
Tech shares lifted the Nasdaq, while the S&P 500 ended flat. The benchmark index remained within striking distance of its record closing high reached on February 19.
The blue-chip Dow ended in negative territory as did Canada’s S&P/TSX Composite Index.
“It almost feels like back to your regularly scheduled bull market,” said Ryan Detrick, chief market strategist at Carson Group in Omaha. “We’ve dealt with the tariffs, we’ve dealt with the Middle East drama, but stocks continue to defy the odds by moving higher with the realization that the U.S. economy remains quite resilient.”
“But today it’s almost like watching paint dry as we’re all waiting for the S&P 500 to make new highs,” Detrick added.
Nvidia shares touched a record high, lifting its market value to US$3.75 trillion and making it the world’s most valuable company.
Among the 11 major sectors of the S&P 500, technology, communication services, and healthcare advanced on the day. Defensives such as real estate, consumer staples and utilities underperformed the broader market.
“The lifeblood of a bull market is rotation,” Detrick said. “And to see technology and communication services taking back the baton is really a good sign that this surprise summer rally likely has legs.”
The fragile truce between Israel and Iran continued to hold, with U.S. President Donald Trump declaring victory despite a lack of clarity regarding the extent of the damage U.S. strikes had on Iran’s uranium enrichment assets.
Fed Chair Jerome Powell, in his second straight day of congressional testimony, reiterated to the Senate Banking Committee that the central bank is well-positioned to wait to cut interest rates until the inflationary effects of Trump’s wide-ranging tariffs are better known.
Financial markets are pricing in almost a 25% likelihood of a rate cut at the July policy meeting, and a 67% probability that the first cut will arrive in September, according to CME’s FedWatch tool.
Housing data on Wednesday showed U.S. new home sales plunged 13.7% and applications for loans to buy homes dipped as mortgage rates edged higher.
On Thursday, the Commerce Department is due to issue its final take on first-quarter GDP, and its Personal Consumption Expenditures (PCE) report on Friday will provide insights into consumer spending and inflation.
The Dow Jones Industrial Average fell 106.59 points, or 0.25%, to 42,982.43, the S&P 500 lost 0.02 points, or 0.00%, to 6,092.16 and the Nasdaq Composite gained 61.02 points, or 0.31%, to 19,973.55.
The S&P/TSX Composite Index ended down 152.30 points, or 0.6%, at 26,566.32, after posting a record closing high on Tuesday.
A heavy weighting in gold stocks, which tend to benefit from safe-haven demand, has helped shield the TSX from some of the volatility that has impacted Wall Street this year but global trade tensions have cooled in recent weeks and a fragile truce between Israel and Iran has continued to hold.
“If things do calm down, I would want to be reducing my exposure to TSX type names and increasing my exposure to growth as there has been significant underperformance in that direction in the last six months,” said Barry Schwartz, chief investment officer at Baskin Wealth Management.
Major U.S. benchmarks, such as the S&P 500, have a heavier weighting than the Toronto market in high-flying technology stocks.
Some of the high-dividend-paying sectors on the TSX lost ground Wednesday as long-term borrowing costs rose. Consumer staples fell 1.7%, real estate lost 1.4% and utilities ended 0.6% lower.
The Canadian 10-year yield was up 4.5 basis points at 3.319% as Canada pledged to invest 5% of its gross domestic product in defense spending by 2035.
“Planned increases in defense expenditures are likely to lead to significantly larger deficits, higher debt and increased issuance,” Randall Bartlett, senior director of Canadian economics at Desjardins, said in a note.
BlackBerry Ltd was a bright spot. Its shares rose nearly 13% after the company raised its annual revenue forecast, anticipating steady demand for its cybersecurity services amid growing online crimes.
In the U.S. market, Tesla shares fell 3.8% as its European sales slumped for the fifth month.
Economic uncertainty continues to weigh on corporate guidance.
FedEx shares slid 3.3% after the package delivery company forecast quarterly profit below estimates as tariffs weighed on global demand. Rival UPS dropped 1.2%.
General Mills also provided disappointing profit guidance, sending its shares 5.1% lower.
Micron Technology surged more than 5% in extended trading after forecasting better-than-expected fourth-quarter revenue.
Declining issues outnumbered advancers by a 1.94-to-1 ratio on the NYSE. There were 174 new highs and 69 new lows on the NYSE. On the Nasdaq, 1,566 stocks rose and 2,859 fell as declining issues outnumbered advancers by a 1.83-to-1 ratio. The S&P 500 posted 24 new 52-week highs and 7 new lows while the Nasdaq Composite recorded 86 new highs and 65 new lows.
Volume on U.S. exchanges was 16.02 billion shares, compared with the 18.08 billion average for the full session over the last 20 trading days.
Reuters, Globe staff