Canada’s main stock index ended lower on Wednesday for a third straight day as investors weighed earnings from some of Canada’s biggest banks and braced for economic data this week that could guide expectations for the timing of interest rate cuts.
The S&P/TSX composite index ended down 75.13 points, or 0.4%, at 21,243.77. It added to its losses since the start of the week after posting on Friday its highest closing level in 22 months.
Wall Street’s main indexes also ended lower.
“It is a downtick for equity markets in general,” said Colin Cieszynski, chief market strategist at SIA Wealth Management. “Markets are continuing to chew through the bank earnings.”
National Bank of Canada and Royal Bank of Canada both beat analysts’ estimates for quarterly profit. National Bank rallied 2.3% but RBC was down 0.2% and the financials sector lost 0.3%.
“The weaker price action may be more about month-end rebalancing, and investors are waiting for the key inflation data in the U.S. [Thursday],” said Angelo Kourkafas, investment strategist at Edward Jones Investments.
Thursday’s release of the U.S. personal consumption expenditures price index for January could offer clues on prospects for Federal Reserve interest rate cuts. It is expected to show prices ticked 0.3% higher on a monthly basis in January.
Among other sectors in Toronto, industrials lost 0.6% and technology was down 0.7%.
The energy sector was a bright spot. It rose 0.2% to post its highest closing level since Nov. 20 even as oil settled 0.4% lower at US$78.54 a barrel.
“Even on days where oil is down a little bit the energy stocks have been quietly working their way and I think that’s because generally we’ve got oil prices up in the high seventies rather than the low seventies,” SIA Wealth Management’s Cieszynski said.
Stocks on both sides of the border have struggled to retain upward momentum in recent days after a lengthy rally peaked last week on enthusiasm around the potential for artificial intelligence (AI), fueled by Nvidia’s quarterly earnings.
Evidence of stubborn inflation in recent data on consumer and producer prices, a resilient U.S. economy, and commentary from some Fed officials have caused the market to dial back expectations for the Fed’s first rate cut to June from March.
“Now that those earnings catalysts are behind us in the rearview mirror there could be some softness as now the market has to get its arms around the inflation trajectory and the Federal Reserve’s reaction, whether it’s with rhetoric or a higher-for-longer policy,” said Keith Buchanan, senior portfolio manager at GLOBALT Investments in Atlanta.
“Any embers or symptoms of resurgence in pockets, or in aggregate, of inflation will definitely be taken pretty harshly by the markets.”
The Dow Jones Industrial Average fell 23.39 points, or 0.06% , to 38,949.02, the S&P 500 lost 8.42 points, or 0.17%, to 5,069.76 and the Nasdaq Composite lost 87.56 points, or 0.55%, to 15,947.74.
Data on Wednesday confirmed the U.S. economy grew at a solid clip in the fourth quarter on strong consumer spending but it appears to have lost some speed early in 2024.
Along with the PCE data, U.S. reports for weekly initial jobless claims and manufacturing activity are due this week and will also help gauge the economy’s strength and path of interest rates.
Boston Fed Bank President Susan Collins said on Wednesday the Fed should be “taking time” to assess data before making any policy change in order to be sure to deliver on both of the central bank’s mandates of maximum employment and price stability.
In addition, New York Federal Reserve President John Williams said that even as there is still some distance to cover in achieving the Fed’s 2% inflation target, the door is opening to rate cuts this year depending on how the data come in.
UnitedHealth fell 2.95% as the biggest drag on the Dow and one of the largest on the S&P 500 after a report on Tuesday said the U.S. Department of Justice had launched an antitrust investigation into the healthcare conglomerate.
Semiconductor equipment supplier Applied Materials lost 2.62% on news that it received a subpoena from the U.S. Securities and Exchange Commission in February.
Beyond Meat shot 30.72% higher as the plant-based meat maker placed its bets on price hikes and steep cost cuts to turn around its battered margins, triggering a squeeze on its highly shorted shares.
Major cryptocurrency firms Coinbase Global advanced 0.7% and peer Marathon Digital closed 2.38% higher but both ended well off their earlier highs as bitcoin surged to nearly US$64,000 before paring gains.
Declining issues outnumbered advancers by a 1.21-to-1 ratio on the NYSE while on the Nasdaq, declining issues outnumbered advancers by a 1.72-to-1 ratio.
The S&P 500 posted 67 new 52-week highs and one new low. The Nasdaq recorded 173 new highs and 95 new lows.
Reuters, Globe staff