TSX posts modest loss Thursday, U.S. markets essentially flat after inflation report

Canada’s main stock index posted a modest loss Thursday, weighed down by the financial and utility sectors, while U.S. stock markets were mixed but essentially flat following the latest consumer inflation report in the U.S.

Headline inflation was higher than expected in December, hitting 3.4 per cent year-over-year compared with 3.1 per cent in November.

U.S. markets fell before slowly climbing back up to par throughout the afternoon.

The S&P/TSX composite index closed down 71.02 points at 20,918.40.

In New York, the Dow Jones industrial average was up 15.29 points at 37,711.02. The S&P 500 index was down 3.21 points at 4,780.24, while the Nasdaq composite was up 0.54 points at 14,970.18.

Despite the increase in headline inflation, there wasn’t a more pronounced selloff in stocks or increase in yields because core inflation was relatively flat, said Macan Nia, co-chief investment strategist at Manulife Investment Management.

Excluding food and fuel prices, inflation in December was closer to economists’ expectations at 3.9 per cent, the slowest annual pace since May 2021.

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Food and energy costs tend to be volatile, and so both the U.S. Federal Reserve and investors tend to look at core prices for a better read on inflation, said Nia.

Investors still expect the overall trend for inflation to continue softening throughout the year, he said, and are taking Thursday’s report in stride.

Alongside inflation numbers, the health of the consumer will be a key metric for investors to watch in 2024, said Nia.

“The consumer, to the surprise of many, was very resilient last year,” he said.

On Friday, U.S. earnings season for the fourth quarter of 2023 will kick off with the major banks reporting results. Those reports will help give insight into how the consumer is doing.

Nia said that banks’ loan loss provisions will be of particular interest, as well as the profile of products like auto loans and credit cards.

“What we’ll be paying very close attention to is the credit profile of the consumer and seeing what it’s doing.”

The Canadian dollar traded for 74.58 cents US compared with 74.73 cents US on Wednesday.

The February crude oil contract was up 65 cents at US$72.02 per barrel and the February natural gas contract was up six cents at US$3.10 per mmBTU.

The February gold contract was down US$8.60 at US$2,019.20 an ounce and the March copper contract was down less than a penny at US$3.78 a pound.

— With files from The Associated Press