S&P/TSX composite closes down as telecom and metal stocks fall, U.S. markets mixed

Canada’s main stock index closed down Tuesday on the same day inflation came in higher than expected, while U.S. stock markets were mixed.

The S&P/TSX composite index ended down 60.11 points at 21,788.48, weighed by losses in the telecom and base metal sectors as part of broader losses

In New York, the Dow Jones industrial average was down 299.05 points at 39,112.16. The S&P 500 index was up 21.43 points at 5,469.30, while the Nasdaq composite was up 220.84 points at 17,717.65.

Technology and commodity stocks have been trading places in recent days for gains and losses, and Tuesday saw tech again on the rise.

Nvidia, which had seen hundreds of billions of dollars wiped from its valuation in recent days gained almost eight per cent to help push up the Nasdaq, and in Canada Celestica Inc. was up 4.6 per cent to help the S&P/TSX information technology index rise 1.2 per cent.

Crypto-related stocks were also on the rise as bitcoin regained some ground lost Monday, while most sectors were in the red including the base metals index down 1.3 per cent and the telecom index down about the same.

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But many investor eyes were focused on the inflation front, as Statistics Canada reported the annual rate rose to 2.9 per cent in May compared with 2.7 per cent in April.

“It was an upside surprise that reverses the general 2024 trend of disinflation momentum that has allowed the Bank of Canada to begin that easing process,” said Tamsin Wilding, principal and portfolio manager for fixed income at Leith Wheeler Investment Counsel Ltd.

“Which complicates what that easing pathway might look like for the Bank of Canada from here,” she said.

Wilding noted that there’s still another inflation report to come in July before the next rate decision, which will help determine if it was a seasonality bump or a more prolonged period of upside surprise.

The central bank has given itself some room, having noted inflation isn’t expected to be a smooth decline, but it does lower the chances of the July cut, she said.

“This print does skew that probability towards more of a cautious or shallow easing.”

Markets now see a less than 50 per cent chance of a rate cut next month, down from around 60 per cent on Monday, while bond yields have climbed slightly on the news.

The lower chances of a rate cut helped push up the Canadian dollar early in the day, but it ended up trading for 73.21 cents US compared with 73.19 cents US on Monday.

The August crude oil contract was down 80 cents at US$80.83 per barrel and the August natural gas contract was down 5 cents at US$2.76 per mmBTU.

The August gold contract was down US$13.60 at US$2,330.80 an ounce and the September copper contract was down six cents at US$4.37 a pound.