S&P/TSX composite ekes out gain as base metals rise, U.S. markets down

The S&P TSX composite index screen at the TMX Market Centre in Toronto is photographed on Friday, November 11, 2022. THE CANADIAN PRESS/ Tijana Martin. TIJ

Base metals helped Canada’s main stock index eke out a gain Friday, while U.S. stock markets were down, led by the Nasdaq’s almost one per cent loss.

Markets had a lot of economic data to digest this week, mainly on inflation, said Kevin Headland, chief investment strategist at Manulife Investment Management.

It wasn’t straightforward — some reports came in stronger than expected, others weaker. Adding to the pile on Friday was a report from the University of Michigan showing consumer sentiment fell unexpectedly in March.

As the tech sector weighed on stocks Friday, markets were also seeing higher volumes and volatility because of the “triple witching,” said Headland — a day where “a lot of derivative contracts … index options and futures are all scheduled to mature at once.”

“In those periods, the markets tend to get whipsawed a little bit,” he said, adding there’s likely some profit-taking on stocks like Nvidia.

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The S&P/TSX composite index closed up 19.30 points at 21,849.15.

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In New York, the Dow Jones industrial average was down 190.89 points at 38,714.77. The S&P 500 index was down 33.39 points at 5,117.09, while the Nasdaq composite was down 155.36 points at 15,973.17.

Next week will be much lighter on the economic data, and all eyes will be on the U.S. Federal Reserve’s interest rate decision.

While the central bank is almost certain to keep its key rate steady, investors will have their ears trained on any comments by central bankers about what they make of the economic data, said Headland.

Expectations for rate cuts in the U.S. have already come down significantly, with cuts potentially starting in June based on what the market is pricing in, said Headland.

“Coming into this year, the market expected six rate cuts. Now they’re down to three.”

The central bank will be cautious with cuts, said Headland.

“You can’t have your cake and eat it too,” he said, meaning both a soft landing and a swift succession of rate cuts.

In Canada, where the economy is on weaker footing, the Bank of Canada may be even more likely to cut in June than the Fed, said Headland.

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Canada will see the latest data on inflation next week. Higher rates have actually been putting upward pressure on inflation as shelter costs have risen, noted Headland.

Cutting, however, could be a “double-edged sword” because it could fan the flames of the housing market, he said.

The TSX performed better than its peers on Friday, mostly because of strength in copper, said Headland.

After news of potential copper production cuts out of China, the price of copper has risen, he said.

The Canadian dollar traded for 73.89 cents US compared with 74.01 cents US on Thursday.

The May crude oil contract was down 16 cents at US$80.58 per barrel and the April natural gas contract was down nine cents at US$1.66 per mmBTU.

The April gold contract was down US$6.00 at US$2,161.50 an ounce and the May copper contract was up eight cents at US$4.12 a pound.

— With files from The Associated Press

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