S&P/TSX Composite Gains, US Stock Markets Fall After Inflation Data

Canada’s main stock index posted gains on Wednesday, while US markets slumped later in the day, recording small losses on new inflation data.

The S&P/TSX composite index rose 32.47 points to 20,454.32.

In New York, the Dow Jones industrial average fell 38.29 points to 33,646.50. The S&P 500 index fell 16.99 points to 4,091.95, while the Nasdaq composite fell 102.54 points to 11,929.34.

The big market news of the day was the latest US inflation data, a key factor in the central bank’s upcoming interest rate decision.

Initially, markets focused on headline inflation numbers, said Tamsin Wilding, fixed income analyst at Leith Wheeler.

Inflation in the US eased last month, rising five percent in March from a year ago, after rising six percent in February.

But stocks became more choppy as the day progressed as some of the key metrics the Federal Reserve looks at were higher than hoped, she said.

Core inflation stood at 5.6 percent, rising for the first time in six months.

“That’s still too high and still creates discomfort for the Federal Reserve,” Wilding said.

The market still largely expects the central bank to announce another small rate hike next month, Wilding said.

Meanwhile, the Bank of Canada surprised no one when it announced on Wednesday that it will continue to maintain its overnight rate while waiting for the effects of higher borrowing costs to work its way through the economy.

Bank of Canada Governor Tiff Macklem said interest rates could rise further if necessary.

“This is good news, but it’s not a job,” Macklem said at a news conference in Ottawa.

“Our destination is the two percent inflation target, and several things need to happen to get inflation all the way back to the two percent target. Inflation expectations must fall further, services price inflation and wage growth must moderate and corporate pricing behavior must normalize.”

The Bank of Canada has also revised its GDP forecast upward for 2023, but downward for 2024.

Wilding said the market tends to price in rate cuts, but the central bank is signaling that rates are unlikely to fall this year.

“It’s marginal, but they now still expect inflation to continue to moderate and return to that target of 2%, but without hurting growth. So that’s kind of a Goldilocks scenario they’re predicting,” she said.

“And that wouldn’t warrant a rate cut either if you’re still seeing positive growth.”

The Canadian dollar traded at 74.37 cents US compared to 74.17 cents US on Tuesday.

The crude oil contract in May increased by US$1.73 to US$83.26 per barrel and the natural gas contract in May fell by nine cents to US$2.09 per mmBTU.

The June gold contract rose $5.90 to $2,024.90 an ounce and the May copper contract rose six cents to $4.08 an ounce.

-With files from The Associated Press

© 2023 The Canadian Press