Canada’s main stock index fell on Tuesday, led by losses in the resource sectors, while investors were disappointed that core inflation rose more than expected in December ahead of next week’s interest rate decision by the Bank of Canada.
At 10:39 a.m. ET, the TSX/S&P composite index was down 82.00 points, or 0.39%, at 20,979.45 after falling as low as 20,842.98 earlier in the trading day.
Energy shares were the top losers on the index, falling 1.7%, while materials were down 1.4% as prices of most base metals dropped on a stronger U.S. dollar and concerns over future demand after top consumer China skipped an expected rate cut.
Data on Tuesday showed Canada’s annual inflation rate rose to 3.4% in Dec. from 3.1% in Nov., driven mainly by higher gasoline prices last month.
While the headline numbers were in line with expectations, the sticky core measures show that overall inflation is likely to come down slowly.
“CPI has come down quite a bit from the peaks. It’s going to get a little bit more difficult to get it back to the 2% range. But my forecast is that the Bank of Canada is still likely to cut interest rates”, Mike Archibald, vice president and portfolio manager at AGF Investments, told Reuters.
“My assumption is that it will happen, likely sometime in the second quarter, but we have to continue to watch the data.”
Money markets now see a 34% chance that the BoC would start cutting interest rates in March, down from nearly 50% before the figures were released, but still see a high chance of a 25-basis-point reduction in April.
Among individual stocks, Barrick Gold slumped 4.6% after the company reported preliminary gold output of 4.05 million ounces in the financial year 2023, below its forecast and analysts’ estimates of 4.16 mln ounces.
First Quantum Minerals fell 3.4% after the Canadian miner said it plans to conserve capital after it was forced to halt production at its Cobre Panama copper mine.
Wall Street’s main indexes fell on Tuesday, as banks came under pressure after mixed earnings from Goldman Sachs and Morgan Stanley kept investors cautious about the health of capital markets and dealmaking, while declines in Tesla and Apple also weighed.
Tesla shed 2.2%, steering a 1% drop in the S&P 500 consumer discretionary sector, after CEO Elon Musk said he would be uncomfortable growing the automaker to be a leader in artificial intelligence and robotics without having at least 25% voting control of the company.
Apple fell 2.4% after offering rare discounts on its iPhones in China on competition pressures, just days after it was overtaken by Microsoft as the world’s most valuable firm.
On the fourth-quarter earnings front, Goldman Sachs reported a 51% rise in profit, as its traders capitalized on a nascent market recovery and its asset and wealth business revenue rose. However, Morgan Stanley’s profit declined, while revenue surpassed expectations on a rebound in dealmaking activity. Their shares were down 0.8% and 3.4%, respectively.
“Morgan Stanley, Goldman Sachs tend to service the wealthier high-net-worth clients, and have much less loan loss reserves,” said Paul Nolte, senior wealth adviser and market strategist at Murphy & Sylvest.
“Overall, I think the banks (results) came in pretty good shape and the banking sector is pretty well-capitalized at this point.”
Wells Fargo, Bank of America, Citigroup and JPMorgan Chase dropped between 1.6% and 2.7% after reporting lower profits on Friday.
The broader banks index slid to an over one-month low on Tuesday.
Wall Street finished the previous week higher as investors continue to price in an around 70% chance of the Federal Reserve delivering a 25-basis-point rate cut in March – despite mixed inflation data and a lack of supporting voices among policymakers for a quick start to monetary policy easing.
UBS Global Research boosted its 2024 year-end target for the S&P 500 on Tuesday to 5,150, representing a nearly 8% upside from current levels.
Despite briefly surpassing its previous record closing high last week, the benchmark index has faced resistance to breaching its highest intra-day level, hit in January 2022.
Investors will parse Fed Board Governor Christopher Waller’s remarks during the day, after Atlanta Fed President Raphael Bostic warned about cutting rates too soon.
The Dow Jones Industrial Average was down 226.52 points, or 0.60%, at 37,366.46, the S&P 500 was down 26.82 points, or 0.56%, at 4,757.01, and the Nasdaq Composite was down 89.39 points, or 0.60%, at 14,883.37.
Dow-component Boeing declined 4.7%, as the Federal Aviation Administration extended the grounding of its 737 MAX 9 airplanes indefinitely and brokerage Wells Fargo downgraded the stock to “equal weight” from “overweight.”
Applied Digital slumped 22.3% after the data-center services provider posted downbeat second-quarter revenue.
Reuters
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