Canada’s main stock index eked out a gain Tuesday, while U.S. markets also rose.
The S&P/TSX composite index closed up 2.79 points at 22,468.16.
In New York, the Nasdaq and the S&P 500 both posted new closing records Tuesday. The Dow Jones industrial average was up 66.22 points at 39,872.99. The S&P 500 index was up 13.28 points at 5,321.41, while the Nasdaq composite was up 37.75 points at 16,832.63.
It was a quiet day of trading ahead of Wednesday, which promises earnings from semiconductor giant Nvidia, and the minutes from the latest U.S. Federal Reserve meeting, said Anish Chopra, managing director with Portfolio Management Corp.
“The markets are certainly waiting for Nvidia’s earnings because that will tell them a lot as it relates to … the future of AI,” he said, adding that “investors have certainly flocked to that area.”
The Fed minutes will come after several officials’ recent comments that more evidence of cooling inflation is needed before the central bank can start cutting interest rates.
“(The minutes) will also give some indication of where the Federal Reserve was leaning when they last met,” said Chopra.
Fed governor Christopher Waller said in a speech Tuesday he expects to see economic data continuing to moderate, but he would “need to see several more months of good inflation data before I would be comfortable supporting an easing in the stance of monetary policy,” unless the job market weakened significantly before then.
The comments from Waller and others didn’t come as any surprise, said Chopra, instead echoing what officials have been saying for a while.
Markets entered 2024 expecting as many as six cuts during the year, but those expectations have been pushed back and shrunk as economic data continued to come in stronger than expected.
“Rates in the U.S. will likely start to get cut very late in the year,” said Chopra.
When they do come, cuts in both the U.S. and Canada will be slow compared with the frantic rate of the hiking cycle, said Chopra.
In Canada, the latest data on inflation showed the consumer price index ticked lower in April. In response, markets increased their bets on a June cut, the odds for which now sit at about a coin toss, said Chopra.
However, the Bank of Canada has to monitor the Fed as well as economic data, he added.
“If they diverge too much, you’ll have an impact on the loonie,” he said.
But the divergence would need to be more than one or two cuts for that scenario to play out, said Chopra.
The Canadian dollar traded for 73.27 cents US compared with 73.45 cents US on Friday.
The June crude oil contract was down 54 cents at US$79.26 per barrel and the June natural gas contract was down eight cents at US$2.67 per 1,000 cubic feet.
The June gold contract was down US$12.60 at US$2,425.90 an ounce and the July copper contract was up three cents at US$5.11 a pound.
— With files from The Associated Press