TORONTO — Canada's main stock index was essentially flat Wednesday despite strength in energy stocks after the Bank of Canada held its overnight rate steady, while U.S. markets ended on a mixed note after softening throughout the afternoon.
The S&P/TSX composite index closed down 8.81 points at 21,025.78.
In New York, the Dow Jones industrial average was down 99.06 points at 37,806.39. The S&P 500 index was up 3.95 points at 4,868.55, while the Nasdaq composite was up 55.97 points at 15,481.92.
Netflix helped lead strength on the Nasdaq after the streaming company reported adding more subscribers in the final quarter of 2023 than analysts expected. Its stock price rose almost 11 per cent Wednesday.
Markets continue to hold out on optimism over easing financial conditions and potential interest rate cuts, said Ilana Schonwetter, investment advisor and portfolio manager at Blueshore Financial.
“The big move that we have seen in the markets, really, since November and into this year, has been based on this expectation of a pivot in central bank policy, towards easing financial conditions and some rate cuts on the horizon.”
Market expectations for cuts, however, remain too aggressive, she said.
“I think particularly with the U.S., the market might be a little bit too optimistic as to the number of rate cuts that are expected.”
Central banks don’t want to cut too fast or too far and risk re-igniting inflation, said Schonwetter.
“They will be rather cautious with the easing of rates, and do so while really monitoring all of the data that comes in,” she said.
That caution was evident Wednesday in the Bank of Canada’s rate announcement. The central bank held its overnight rate steady, surprising no one, but offered a shift in its messaging.
The Bank of Canada’s discussion over monetary policy is shifting from whether rates are high enough, to how long they need to stay at current levels, said governor Tiff Macklem.
However, hikes could still happen if inflation gains momentum again, he warned.
The Bank of Canada is in a difficult spot, said Schonwetter, as the Canadian economy and consumer have weakened considerably under the weight of higher interest rates, in stark contrast to the U.S.
Keep rates high for too long and Canada risks tipping into recession — but diverge too far from the Fed with rate cuts and inflation could take off again, fuelled by pressure on the Canadian dollar, Schonwetter said.
“They are really caught between a rock and a hard place.”
The Canadian dollar traded for 74.16 cents UScompared with 74.19 cents US on Tuesday.
The March crude oil contract was up 72 cents at US$75.09 per barreland the March natural gas contract was up 10 cents at US$2.26 per mmBTU.
The February gold contract was down US$9.80 at US$2,016.00 an ounceand the March copper contract was up nine cents at US$3.89 a pound.
— With files from Nojoud Al Mallees and The Associated Press
This report by The Canadian Press was first published Jan. 24, 2024.
Companies in this story: (TSX:GSPTSE, TSX:CADUSD)
Rosa Saba, The Canadian Press
