Canada’s main stock index closed higher on Tuesday, powered by energy and financial shares, as investors digested news that inflation inched higher in January.
The Toronto Stock Exchange’s S&P/TSX composite index closed up 165.61 points, or 0.65%, at 25,648.84.
The heavyweight energy sector rose 1.4% with oil prices as traders assessed the fallout from drone attacks on a key conduit for Kazakhstan’s oil exports. Traders were still cautious as talks to end the war in Ukraine could boost Russian supplies.
Financials also added 0.8%, led by iA Financial and the country’s biggest lender Royal Bank of Canada.
Bay Street analysts expected big banks to post strong first-quarter results next week, but noted an uncertain outlook for the rest of 2025 due to risk of a tariff war between the U.S. and other countries.
Materials rose 1.2% as it tracked a jump in gold prices driven by persistent demand for safe-haven assets.
Separately, January’s annual inflation rate in Canada rose slightly to 1.9% from December.
While lower prices from a sales tax reprieve provided some relief, they were partly offset by rising costs of gasoline and natural gas, as shown in Tuesday’s data.
The yield on Canada’s 10-year benchmark bond and the 5-year benchmark bond hit three-week highs, exerting pressure on equities earlier in the day.
“There is clear evidence that underlying inflation pressures are building,” said Stephen Brown, deputy chief North America economist at Capital Economics. “Given the tariff threat hanging over the economy, we still think the odds slightly favour another cut from the Bank of Canada next month, but it is shaping up to be a close call.”
The threat of tariffs somewhat receded as global attention shifted to the developments in the Ukraine conflict involving U.S. President Donald Trump and his Russian counterpart, Vladimir Putin.
In other stocks, Fortuna Mining lost 8.3% after CIBC downgraded the miner to “underperform” from “neutral.”
The S&P 500 squeaked past its previous record closing high on Tuesday at the top of a holiday-shortened week, with earnings season winding down, U.S. Federal Reserve minutes on tap, and geopolitical uncertainties churning in the background.
The three major stock indexes wobbled between red and green for much of the session, but all three managed to flip green in the closing minutes.
“There’s a little bit of a three-day weekend hangover today,” said Ryan Detrick, chief market strategist at Carson Group in Omaha. “There’s just truly not a lot going on, which kind of a nice change as we simply consolidate right beneath potential new all-time highs.”
“At the same time we have the Fed minutes, coming out tomorrow and big retail earnings also coming out later this week,” Detrick added. “But when you put it all together, you have a day like today where it’s just kind of ‘wait-and-see.’”
On Wednesday, the U.S. Federal Reserve is expected to release the minutes of its January policy meeting, at which the voting members elected to let interest rates stand amid signs of an inflation rebound and the unknown extent and effects of President Trump’s threatened tariffs.
Remarks from U.S. Federal Reserve policymakers largely adhered to the same script, with Philadelphia Fed President Patrick Harker, Governors Michelle Bowman and Christopher Waller saying they believe economic strength and elevated inflation warrant holding the policy rate steady for the time being.
San Francisco Fed President Mary Daly reiterated that a pause in rate cuts is appropriate until more visible progress is made toward bringing inflation down to the Fed’s 2% goal.
The minutes will be scrutinized for clues regarding the central bank’s path forward, particularly in light of recent data, which shows price growth gaining momentum, falling consumer sentiment and weaker-than-expected retail sales.
“The Fed is being reasonably transparent here,” said Chuck Carlson, chief executive officer at Horizon Investment Services in Hammond, Indiana. “There’s been evidence that the economy is slowing down a little bit and I’m sure they’re watching that. But I don’t think they feel significant pressure, at least at this point, to drop rates anytime soon.”
The Dow Jones Industrial Average rose 10.26 points, or 0.02%, to 44,556.34, the S&P 500 gained 14.95 points, or 0.24%, to 6,129.58 and the Nasdaq Composite gained 14.49 points, or 0.07%, to 20,041.26.
Fourth-quarter earnings season has come around the final bend, with 383 companies in the S&P 500 having reported as of Friday. Of those, 74% have posted better-than-expected results, according to LSEG data.
Analysts currently see fourth-quarter S&P 500 earnings growth of 15.3% year-on-year, up from the 9.6% estimate as it stood on Jan. 1.
Intel jumped 16.1% after a report over the weekend said rivals Taiwan Semiconductor Manufacturing Co. and Broadcom were considering potential deals that could split the chipmaker in two.
The move gave a boost to the Philadelphia SE semiconductor index, which gained 1.7%.
Constellation Brands jumped 4.0% after Warren Buffett’s Berkshire Hathaway disclosed a new investment in the company on Friday.
Meta Platforms slid 2.8%, snapping its 20-session winning streak.
Advancing issues outnumbered decliners by a 1.53-to-1 ratio on the NYSE. There were 298 new highs and 85 new lows on the NYSE.
On the Nasdaq, 2,289 stocks rose and 2,087 fell as advancing issues outnumbered decliners by a 1.1-to-1 ratio.
The S&P 500 posted 29 new 52-week highs and 11 new lows while the Nasdaq Composite recorded 126 new highs and 113 new lows.
Volume on U.S. exchanges was 16.36 billion shares, compared with the 15.57 billion average for the full session over the last 20 trading days.
Reuters