Canada’s main stock index was down almost 200 points in a broad-based decline led by financials, utilities and base metals, while U.S. stock markets were mixed.
The S&P/TSX composite index closed down 182.42 points at 21,887.34.
In New York, the Dow Jones industrial average was down 120.62 points at 38,747.42. The S&P 500 index was up 14.53 points at 5,375.32, while the Nasdaq composite was up 151.02 points at 17,343.55.
Shares in Apple jumped 7.3 per cent after the company highlighted its push into artificial intelligence technology, helping offset losses in the tech sector.
Markets spent the day waiting for Wednesday, when investors will get the latest data on U.S. consumer inflation in the morning and an interest rate decision in the afternoon, said Dustin Reid, vice-president and chief strategist for fixed income at Mackenzie Investments.
“Both, I think, are important for the directionality of markets going forward, whether it’s fixed income, or currencies, or equities or credit,” said Reid.
“Volumes are a little bit lighter here than usual in anticipation of tomorrow.”
Though the U.S. Federal Reserve isn’t expected to cut its key rate this time around, it will release an updated forecast for where it expects rates to go this year, said Reid.
The last projection was for three rate cuts in 2024, but after a string of stronger-than-expected economic data reports, it’s now “a very fine line between one and two,” he said.
That’s in line with market expectations, said Reid, as the Fed has repeatedly signalled it needs more evidence of a steady move lower in inflation before it feels comfortable cutting rates.
“All the big data releases, I would even say some of the secondary releases, continue to matter significantly,” he said.
If either the inflation report or the Fed report and forecast deliver a hawkish surprise, that will likely result in an “outsized reaction” with yields moving higher, said Reid.
Expectations are for May’s inflation rate to remain unchanged at 3.4 per cent.
Last week the Bank of Canada cut for the first time since its hiking cycle, followed by the European Central Bank. Reid said he expects it to cut again in July.
The Canadian dollar traded for 72.64 cents US compared with 72.65 cents US on Monday.
The July crude oil contract was up 16 cents at US$77.90 per barrel and the July natural gas contract was up 22 cents at US$3.13 per mmBTU.
The August gold contract was down 40 cents at US$2,326.60 an ounce and the July copper contract was down three cents at US$4.51 a pound.
— With files from The Associated Press
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