Canada’s main stock index moved lower Monday while U.S. markets were mixed ahead of major economic data reports coming in the days ahead.
“It really has been one of those Mondays where markets are treading water and will start swimming a little faster in one direction or another later on this week,” said Craig Fehr, head of investment strategy for Edward Jones.
This week will bring several major economic data reports as markets try to figure out when the U.S. Federal Reserve could start cutting interest rates.
These include monthly reports on consumer price inflation and wholesale inflation.
The S&P/TSX composite index closed down 49.76 points at 22,259.17.
In New York, the Dow Jones industrial average was down 81.33 points at 39,431.51. The S&P 500 index was down 1.26 points at 5,221.42, while the Nasdaq composite was up 47.37 points at 16,388.24.
Markets are in “wait-and-see mode,” said Fehr.
In just a matter of months, the narrative over interest rates has shifted, he said, with markets now expecting dramatically fewer cuts in the U.S. this year than they did before. That’s because of a string of stronger-than-expected economic data reports, he said, which confirmed the next mile of the fight against inflation is going to be more difficult.
“Traders are eyeballing the data later this week that’s going to prove to probably be pretty influential in terms of setting the tone for equity markets as we move through not only the remainder of this month, but … the course of the summer,” said Fehr.
After reacting to disappointingly strong data, markets regained their footing somewhat over the past couple of weeks, he said.
“I think this week’s CPI data will either seek to validate the more positive tone of the markets in the last couple of weeks, or perhaps reignite some of those worries that we saw in April,” said Fehr, adding he thinks the former is more likely.
Regardless, this week will likely be volatile as investors react not only to the U.S. inflation data, but also to U.S. retail sales data and earnings from major retail companies like Home Depot and Walmart.
“We’re going to get kind of both ends of the spectrum,” said Fehr, with data on inflation and also how the consumer is faring. Markets are looking for declining inflation, he said, but also resilient economic growth.
In Canada, where the economy has cooled more quickly, interest rate cuts could come as early as June.
The Canadian dollar traded for 73.14 cents US compared with 73.18 cents US on Friday.
The June crude oil contract was up 86 cents at US$79.12 per barrel and the June natural gas contract was up 13 cents at US$2.38 per 1,000 cubic feet.
The June gold contract was down US$32 at US$2,343 an ounce and the July copper contract was up 10 cents at US$4.76 a pound.