S&P/TSX composite posts small gain, U.S. markets slightly down

Canada’s main stock index eked out a small gain Tuesday thanks to strength in the energy sector, while U.S. markets were slightly down.

The S&P/TSX composite index was up 32.79 points at 19,657.53.

The Nasdaq underperformed somewhat against its peers for the second day in a row.

After two volatile weeks that saw big tech stocks outperforming cyclical stocks like banks, market conditions are starting to normalize, said Greg Taylor, chief investment officer at Purpose Investments.

“You’re seeing some of the big winners from last week start to reverse and some of the losers start to pick up some of that … ground they lost.”

In New York, the Dow Jones industrial average was down 37.83 points at 32,394.25. The S&P 500 index was down 6.26 points at 3,971.27,while the Nasdaq composite was down 52.76 points at 11,716.08.

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After turmoil in the banking sector, investors are increasingly convinced that the Federal Reserve is nearly finished its rate hiking cycle, if it’s not already done, said Taylor. He thinks if the Fed hikes again, it would be a small increase and the last before a pause.

“The Fed usually hikes until something breaks. And I think the big concern is that they did that, and that caused stress in the regional bank systems in the U.S.”

The big debate now is about whether the Fed will cut rates at all in 2023, said Taylor.

“The market is starting to press in that they are going to be cutting by the fall,” he said. “That might be a little premature.”

In the shorter term, Taylor said all eyes will be on the next earnings season.

“I think earnings season in April is going to be incredibly volatile,” he said.

“Everyone’s been waiting for signs of stress from the rate hikes.”

Taylor added the next few weeks will be very data-dependent as investors look for more signs that the Fed could be ready to hit pause on rates.

The Canadian dollar traded for 73.39 cents UScompared with 73.09 cents US on Monday.

The May crude contract was up 39 cents at US$73.20 per barrel and the May natural gas contract was down seven cents at US$2.15 per mmBTU.

The April gold contract was up US$19.70 at US$1,973.50 an ounceand the May copper contract was up less than a penny at US$4.09 a pound.