S&P/TSX composite index burdened by energy, US markets rise

TORONTO — Weakness in energy and base metals led Canada’s main stock index to a loss on Tuesday, a day ahead of a much-anticipated Bank of Canada interest rate decision, while U.S. markets rose.

The S&P/TSX composite index fell 138.51 points to 21,978.18.

In New York, the Dow Jones industrial average rose 140.26 points to 38,711.29. The S&P 500 rose 7.94 points to 5,291.34, while the Nasdaq composite rose 28.38 points to 16,857.05.

US markets are dealing with economic headlines “which have become increasingly negative recently,” said Kevin Burkett, portfolio manager at Victoria-based Burkett Asset Management.

“We’re in this bad news market,” he added, as investors look for signs that the US Federal Reserve may start cutting interest rates soon.

The latest data showed that US employers advertised fewer jobs at the end of April than economists had expected.

Investors likely see the report as another sign of weakness they’re looking for in the economy, Burkett said.

However, markets are also concerned that the economy could weaken too much as the lagged effect of interest rate hikes runs its course, he added.

“We want the economic data to cool and we want inflation to hit target because that will cause interest rate cuts. But we fear there could be overruns,” he said. “In particular, we’re worried because the gap in rate hikes has been wider than I think most expected.”

Friday will bring a broader report on the US labor market, the May jobs report.

The labor market is where power has been most resilient, Burkett said, surprising market watchers.

North of the border, the Bank of Canada is expected to start cutting its key interest rate on Wednesday, Burkett said, though that’s not a given.

If the central bank doesn’t cut this week, a cut in July is almost guaranteed, he said.

However, the fact that the U.S. likely won’t taper until at least the fall complicates the Bank of Canada’s decision, Burkett added, and a policy divergence between the two central banks could have negative implications for the bullpen currency.

The downward trend in oil prices continued on Tuesday, weighing on the TSX, where the energy index fell more than two percent.

“The same negative macroeconomic headlines that have increased the likelihood of a rate cut tomorrow are affecting expected demand for energy products, which is affecting oil prices,” Burkett said.

The July crude contract was down 97 cents at $73.25 a barrel and the July natural gas contract was down 17 cents at $2.59 per 1,000 cubic feet.

The Canadian dollar traded at 73.09 US cents compared to 73.34 US cents on Monday.

The August gold contract fell $21.90 to $2,347.40 an ounce and the July copper contract fell 13 cents to $4.54 a pound.

— With files from the Associated Press

This report by The Canadian Press was first published on June 4, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

Rosa Saba, Canadian Press