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S&P/TSX composite down 1.6 per cent, U.S. stock markets also fall

The Canadian Press

TORONTO — Canada's main stock index fell 1.6 per cent Wednesday in a broad-based decline, while U.S. stock markets also fell.

The S&P/TSX composite index closed down 367.07 points at 21,897.98.

In New York, the Dow Jones industrial average was down 411.32 points at 38,441.54. The S&P 500 index was down 39.09 points at 5,266.95, while the Nasdaq composite was down 99.30 points at 16,920.58.

Rising yields weighed on markets Wednesday, especially more rate-sensitive sectors, said Pierre-Benoît Gauthier, vice-president of investment strategy at IG Wealth Management.

“These increases come on the back of weak auctions that we had all week for bonds,” he said.

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“It’s going to be volatile,” added Gauthier, but “I don’t think it’s necessarily a trend.”

Traders continue to adjust their expectations for interest rate cuts from the U.S. Federal Reserve, he said. Those expectations have been significantly pared back from earlier this year as economic data has been coming in stronger than expected.

On Thursday and Friday, investors will get fresh data out of the U.S., including the Personal Consumption Expenditures index, a key measure of inflation. The data will be significant pieces of information as market watchers try to determine whether a cut is possible before the end of the year, said Gauthier.

“If we are going to have cuts before the election, they need to happen pretty fast,” he said.

“We need some data, some good data that would support a cut, and we need it now.”

For the PCE report, anything higher than what’s expected will be “very, very bad,” said Gauthier.

As for GDP, a large miss or a large beat would also be received negatively, he said.

The U.S. consumer has remained surprisingly resilient, said Gauthier, though it’s an increasingly polarized picture.

“It feels like there are two types of consumer right now,” he said. “Those who are doing great, and those who are doing bad, and none in the middle.”

It’s a different story in Canada.

“I still believe that we could move before the Fed because the Canadian consumer is in a clear difficult state, whereas the U.S. consumer, it’s not that clear,” said Gauthier.

BMO and National Bank of Canada were the latest Canadian banks to report earnings Thursday. BMO’s earnings missed expectations on higher loan-loss provisions and U.S. growth issues, while National Bank saw its profit rise even as its loan-loss provisions rose as well.

The Canadian dollar traded for 72.99 cents US compared with 73.32 cents US on Tuesday.

The July crude contract was down 60 cents at US$79.23 per barrel and the June natural gas contract was down 10 cents at US$2.49 per 1,000 cubic feet.

The August gold contract was down US$15.20 at US$2,364.10 an ounce and the July copper contract was down seven cents at US$4.79 a pound.

This report by The Canadian Press was first published May 29, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

Rosa Saba, The Canadian Press