Canada’s main stock index ended slightly lower on Tuesday, extending its pullback from a 22-month high, as losses for financials after Bank of Montreal missed earnings estimates offset gains for energy shares.
The S&P/TSX composite index ended down 5.41 points, or 0.03%, at 21,318.90. It was the second straight day of declines for the index after it posted on Friday its highest closing level since April 2022.
“BMO came in just below expectations. So that’s going to be a little concern to the overall banking system. And the fear is whether some of the other banks that would report later in the week have got the same issue that the BMO has experienced,” said Greg Taylor, chief investment officer at Purpose Investments.
Bank of Montreal shares fell 3.6% after the bank reported first-quarter profit below analysts’ estimates, hurt by larger-than-expected funds set aside for potential credit losses in a turbulent economy.
Shares of Bank of Nova Scotia fared better, rising 3.2% after the bank beat profit estimates. Royal Bank of Canada and National Bank of Canada are due to report on Wednesday.
The heavily weighted financials sector was down 0.4%, while energy added 0.4% as oil settled 1.7% higher at $78.87 a barrel after sources said OPEC+ is considering extending voluntary oil output cuts into the second quarter.
The consumer discretionary sector also notched gains, adding 0.7%.
On Wall Street, stocks closed near flat ahead of U.S. inflation and other economic data that could shed light on the possible timing of a Federal Reserve interest rate cut.
As corporate earnings season winds down, investors refocused on economic data and the likely path of U.S. rates. Equities have been on a furious rally for weeks, fueled largely by enthusiasm about artificial intelligence-related stocks that lifted the S&P 500 and Dow Jones industrials to record levels while leaving the Nasdaq just short of a new high.
With the latest employment report not due until next week, the spotlight is on Thursday’s January personal consumption expenditures price index (PCE), the Fed’s preferred inflation gauge.
Should the PCE reading resemble recent inflation readings on consumer and producer prices, it could compel the Fed to hold rates at current levels longer than the market is anticipating.
On Monday, Kansas City Federal Reserve Bank President Jeffrey Schmid used a debut speech on policy to signal that he remains focused on the threat of high inflation and is in no rush to cut rates.
In addition, Fed Governor Michelle Bowman on Tuesday indicated she is in no hurry to cut rates, given upside risks to inflation that could stall progress or even cause price pressures to resurge.
“It’s been toppy, it feels like it is clearly a little bit stretched,” said Ken Polcari, managing partner at Kace Capital Advisors in Boca Raton, Florida.
“The market is getting at least attuned to the fact they are not going to get what they want and so it is backing up. ... You’re going to see it fade in a hurry if the PCE number comes in as expected or hotter than expected.”
The Dow Jones Industrial Average fell 96.82 points, or 0.25%, to 38,972.41. The S&P 500 gained 8.65 points, or 0.17%, at 5,078.18 and the Nasdaq Composite rose 59.05 points, or 0.37%, to 16,035.30.
Expectations for a cut of at least 25 basis points (bps) by the Fed at its June meeting stand at 59.1%, down from the near certainty at the end of January, according to the CME Group’s FedWatch tool.
Other data due this week which could help shape expectations from the Fed include the second estimate of gross domestic product, jobless claims and manufacturing activity.
U.S. consumer confidence retreated in February after a three-month gain, and orders for long-lasting U.S. manufactured goods fell more than expected in January, data on Tuesday showed.
Stocks gained some late support from Apple, which erased earlier declines to close up 0.81% after Bloomberg News reported the iPhone maker canceled work on its electric car, shifting some employees to its artificial intelligence project.
But UnitedHealth dropped just before the closing bell to end down 2.27% as the biggest drag on the Dow after WSJ reported the U.S. Department of Justice has launched an antitrust investigation into the company.
Viking Therapeutics surged 121.02% after its experimental drug to treat obesity helped patients achieve “significant” weight loss in a mid-stage study.
In turn, Amgen, which is also developing a weight-loss drug, lost 2.75%.
Advancing issues outnumbered decliners by a 1.45-to-1 ratio on the NYSE while on the Nasdaq, advancing issues outnumbered decliners by about 1.6-to-1.
The S&P 500 posted 46 new 52-week highs and no new lows while the Nasdaq recorded 253 new highs and 66 new lows.
Volume on U.S. exchanges was 11.21 billion shares, compared with the 11.71 billion average for the full session over the last 20 trading days.
Canadian government bond yields moved higher across a steeper curve, with the 10-year up 7.1 basis points at 3.568%.
In other markets, bitcoin hit a two-year high on Tuesday on signs large players were buying the cryptocurrency, while smaller rival ether topped US$3,200 for the first time since 2022.
Bitcoin has rallied more than 10% in two sessions, helped by Monday’s disclosure from crypto investor and software firm MicroStrategy that it had recently purchased about 3,000 bitcoins for an outlay of US$155 million.
The original and largest cryptocurrency by market value has also been buoyed recently by the approval of bitcoin-owning exchange-traded funds (ETFs) in the United States. On Monday, trading volumes in several of the funds spiked and crypto-linked firms rallied too, in contrast to nervous broader markets.
Bitcoin by late afternoon was up 4.7% at $57,232, while ether reached as high as $3,290, its highest since April 2022.
Reuters, Globe staff