S&P/TSX composite posts small gain Tuesday, U.S. stock markets flat

Strength in energy and base metals helped Canada’s main stock index post a small gain, while U.S. markets were mixed but relatively flat.

The S&P/TSX composite index closed up 31.15 points at 22,290.62.

In New York, the Dow Jones industrial average was up 31.99 points at 38,884.26. The S&P 500 index was up 6.96 points at 5,187.70, while the Nasdaq composite was down 16.69 points at 16,332.56.

U.S. markets are in consolidation mode as they digest the events of last week, said Mike Archibald, vice-president and portfolio manager with AGF Investments Inc.

With no important economic data this week and earnings season coming to a close, “the underlying tone to the market is one of a little bit more defensive sector leadership, as well as some interest-rate sensitive parts of the market,” said Archibald.

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Treasury yields have eased since last week, which saw the U.S. Federal Reserve hold its key interest rate steady as well as a weaker-than-expected jobs report. These two items helped the market get back on its feet over the past few trading days.

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The Fed’s narrative was less hawkish than many feared, said Archibald.

“Even if inflation ticked up a little bit from here they’re not likely to raise rates again,” he said. “So I think that’s really what’s driven the move lower in bond yields.”

Since the jobs report, markets are considering again that the Fed could cut rates twice in 2024, after previously paring back expectations to just one, said Archibald.

“Obviously, the macro environment is still weighing heavily on the direction for stocks,” he said.

“I think we’re just going to be in this world … where every data point is going to be probably over-scrutinized.”

Earnings overall in the U.S. have been better than expected, said Archibald. As the year progresses, he thinks investors could shift their preferences somewhat away from technology and toward financial, resource and industrial companies.

“I’m not saying technology’s going to do poorly, but it might underperform the market a little bit here.”

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In Canada, earnings season is in full swing this week, with a number of large companies — Brookfield, Shopify, Manulife and WSP Global among them — set to report, said Archibald.

The Canadian economy is much more tied to resources than the U.S. economy, he noted.

“(It) looks like we should start to build on a little bit of the momentum that we saw last quarter with respect to commodity earnings reports,” he said.

Oil is a big topic right now, he added, with an OPEC meeting later this week, Israel mounting its offensive on Rafah, and the U.S. looking to replenish its reserves.

The Canadian dollar traded for 72.97 cents US compared with 73.20 cents US on Monday.

The June crude oil contract was down 10 cents at US$78.38 per barrel and the June natural gas contract was up a penny at US$2.21 per 1,000 cubic feet.

The June gold contract was down US$7.00 at US$2,324.20 an ounce and the July copper contract was down a penny at US$4.61 a pound.

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