S&P/TSX composite edges lower, U.S. stock markets climb as Nasdaq posts new record

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Surprisingly strong April jobs report likely to ‘raise eyebrows’ at the Bank of Canada
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Canada’s main stock index edged lower Tuesday, led by weakness in energy stocks, while U.S. markets rose and the Nasdaq posted a new record high.

“I think the market’s consensus might be a little bit lower than the economists’ consensus in terms of the (U.S.) CPI print tomorrow,” said Jules Boudreau, senior economist at Mackenzie Investments.

The report will offer more insight into the data the U.S. Federal Reserve has as it weighs when to start cutting interest rates.

Tuesday brought the producer price inflation report, another measure of inflation that at first glance looked too hot, said Boudreau.

But markets have recovered from their initial negative reaction to the report, he said, after a closer read showed some lower revisions for previous months, and that the components putting upward pressure on producer prices were ones the central bank pays less attention to.

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“The hotter components in April were components that don’t really feed into the numbers that the Fed looks at,” said Boudreau.

“So because of all of those numbers, probably on net, this is actually an encouraging PPI number ahead of CPI tomorrow.”

The S&P/TSX composite index closed down 15.83 points at 22,243.34.

In New York, the Dow Jones industrial average was up 126.60 points at 39,558.11. The S&P 500 index was up 25.26 points at 5,246.68, while the Nasdaq composite was up 122.94 points at 16,511.18.

Several so-called “meme” stocks rose Tuesday in an echo of the social-media-driven frenzy of three years ago, helping lift the market, said Boudreau.

Shares in GameStop Corp. surged 60 per cent, while shares in AMC Entertainment Holdings Inc. were up almost 32 per cent. In Canada, shares in BlackBerry rose almost 12 per cent.

Fed chair Jerome Powell spoke at a panel in Amsterdam Tuesday, saying the central bank is unlikely to raise its key interest rate despite inflation’s stubbornness. He called the producer price report “sort of mixed,” not hot.

The speech didn’t offer investors anything new, said Boudreau.

“I think he’s going to say the same thing that he’s been saying for a while until he’s ready to pivot, saying that rates are going to be high for a long time,” he said.

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Small-cap stocks outperformed on Tuesday, noted Boudreau, likely in part due to the meme stocks but also just as a generally positive sign that companies other than the major tech names will benefit from lower rates when they come.

The Canadian dollar traded for 73.24 cents US compared with 73.14 cents US on Monday.

The June crude oil contract was down US$1.10 at US$78.02 per barrel and the June natural gas contract was down four cents at US$2.34 per 1,000 cubic feet.

The June gold contract was up US$16.90 at US$2,359.90 an ounce and the July copper contract was up 12 cents at US$4.89 a pound.

— With files from The Associated Press

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