TORONTO — Canada's main stock index fell almost 300 points Tuesday on the heels of new data showing inflation ticked higher in April, while U.S. stock markets also moved lower.
The S&P/TSX composite index was down 297.90 points at 20,242.07, dragged down by losses in the energy sector as well as financials and base metals.
In New York, the Dow Jones industrial average was down 336.46 points at 33,012.14. The S&P 500 index was down 26.38 points at 4,109.90, while the Nasdaq composite was down 22.16 points at 12,343.05.
The TSX was down after the latest consumer price index showed April inflation was hotter than expected, said Greg Taylor, chief investment officer at Purpose Investments.
The annual pace of inflation rose in April for the first time since it peaked in June last year, at 4.4 per cent compared with 4.3 per cent in March. Higher mortgage interest costs from central bank rate hikes were one of the drivers of the higher print, Statistics Canada said Tuesday.
Taylor expects volatility around economic data points to continue in the coming events, adding that it will be harder for central banks to get inflation down to two per cent than it was to take inflation down a few points from its 2022 highs.
“You can’t just extrapolate the path, the drop in inflation we had, and that seems to be one of the big things that snuck into markets today. And it’s causing some weakness,” he said.
Taylor said investors should take the latest inflation reading as further indication that rate cuts this year from the central bank are highly unlikely.
“I think that's a really unlikely scenario. And the only reason that they're going to start cutting rates is a massive recession,” he said.
Meanwhile in the U.S., the ongoing talks about the debt ceiling continued to add uncertainty to the market, said Taylor.
While retail sales data released Tuesday showed a modest, anticipated uptick in consumer spending, earnings from Home Depot were messier than expected, said Taylor.
Home Depot reported its revenue fell short of expectations in the first quarter, and the company cut its profit and sales outlook for the year as well.
“I think that just goes to show that there is a bit of a slowdown in consumer spending,” said Taylor.
Markets seem to be stuck in a purgatory, said Taylor, trapped in a range amid lingering concerns about inflation and the debt ceiling.
The Canadian dollar traded for 74.32 cents UScompared with 74.15 cents US on Monday.
The June crude oil contract was down 25 cents at US$70.86 per barreland the June natural gas contract was up less than a penny at US$2.38 per mmBTU.
The June gold contract was down US$29.70 at US$1,993.00 an ounce and the July copper contract was down eight cents at US$3.67 a pound.
— With files from The Associated Press
This report by The Canadian Press was first published May 16, 2023.
Companies in this story: (TSX:GSPTSE, TSX:CADUSD)
Rosa Saba, The Canadian Press
Note to readers: This is a corrected story. An earlier version had the incorrect closing number for the Dow.
