TORONTO — Canada's main stock index posted a modest gain on Tuesday, while U.S. markets rose after the latest data on inflation.
The Nasdaq notched a 1.5-per-cent increase, with some large tech companies regaining momentum, while the S&P 500 rose 1.1 per cent, helping walk back losses from the past two days.
U.S. inflation was 3.2 per cent in February, up slightly from 3.1 per cent in January.
“This is the second month in a row that we got a bit of an upside surprise in inflationary pressures,” said Mona Mahajan, senior investment strategist at Edward Jones.
Despite the higher headline number, she noted that the year-over-year core inflation metric ticked lower to 3.8 per cent, “which I think is what investors wanted to see.”
“We’re certainly getting two different reactions from the stock market and the bond market,” Mahajan added.
Stocks rose, resuming their recent trend after a couple of days of weakness. Meanwhile, bond yields also moved higher, which normally would weigh on equities.
In New York, the Dow Jones industrial average was up 235.83 points at 39,005.49. The S&P 500 index was up 57.33 points at 5,175.27, while the Nasdaq composite was up 246.36 points at 16,265.64.
The S&P/TSX composite index closed up 61.80 points at 21,831.02.
Later this week, investors will also get more reports on inflation in the U.S., plus retail sales, said Mahajan.
Those inflation reports — producer prices and core personal consumption — “tend to be a little bit more benign than the CPI,” she said.
“So maybe this is a bit of a sigh of relief today.”
Market expectations for rate cuts to begin in June didn’t shift lower either, said Mahajan.
Inflation is expected to continue moderating against a backdrop of economic resilience, with rate cuts likely on the way, she said.
“Markets have performed well in that backdrop,” she said.
The U.S. Federal Reserve's upcoming interest rate decision is next week, but the central bank is expected to hold its key rate steady, as did the Bank of Canada earlier this month. According to data from CME Group, markets expect another hold in May.
All eyes will remain on inflation, as well as on the consumer, which has remained more resilient than many have expected, said Mahajan.
The Canadian dollar traded for 74.08 cents UScompared with 74.12 cents US on Monday.
The April crude oil contract was down 37 cents at US$77.56 per barrel and the April natural gas contract was down five cents at US$1.71 per mmBTU.
The April gold contract was down US$22.50 at US$2,166.10 an ounce and the May copper contract was down less than a penny at US$3.93 a pound.
— With files from The Associated Press
This report by The Canadian Press was first published March 12, 2024.
Companies in this story: (TSX:GSPTSE, TSX:CADUSD)
Rosa Saba, The Canadian Press
