TORONTO — Canada's main stock index was dragged lower Wednesday by losses in energy stocks, while U.S. stock markets were mixed.
Markets took a break from reacting to headlines about tariffs to take in the latest update to the macroeconomic picture, said Tamsin Wilding, principal and portfolio manager for fixed income at Leith Wheeler Investment Counsel Ltd.
“It really is about these concerns about sticky inflation continuing to linger, and this is even before any potential tariff shocks that could be incoming as well,” said Wilding.
Inflation in the U.S. worsened in January, unexpectedly rising to three per cent.
However, despite the disappointment, markets didn’t slide dramatically. Investors are likely taking the data with a grain of salt, since last year saw a similar seasonal bump, said Wilding.
In New York, the Dow Jones industrial average was down 225.09 points at 44,368.56. The S&P 500 index was down 16.53 points at 6,051.97, while the Nasdaq composite was up 6.10 points at 19,649.95.
The S&P/TSX composite index closed down 68.72 points at 25,563.11.
U.S. Federal Reserve chair Jerome Powell said this week in testimony before Congress that the central bank is in no hurry to cut interest rates further.
The Fed is waiting to see how inflation develops in the coming months before making a move on interest rates, Wilding said.
Right now, markets are pricing in just one cut from the Fed this year, and not until near the end, said Wilding.
In Canada, the concern around tariffs is more about their downside risk to economic growth, said Wilding.
The Bank of Canada released its summary of deliberations for last month’s interest rate cut. The potential for tariffs weighed on the central bank’s governing council, adding uncertainty to what could lie ahead for monetary policy.
“Members also agreed that the threat of tariffs had increased uncertainty, and this would weigh on business confidence and investment intentions, as well as consumer sentiment,” the report reads.
"This also supported the case for a lower policy rate.”
However, the deliberations also emphasized that fiscal policy is a more appropriate response in a tariff environment than the blunt tool of monetary policy, noted Wilding.
Expectations are currently split for whether the Bank of Canada will cut in March, said Wilding.
The Canadian dollar traded for 69.94 cents US compared with 69.90 cents US on Tuesday.
The March crude oil contract was down US$1.95 at US$71.37 per barrel and the March natural gas contract was up five cents at US$3.57 per mmBTU.
The April gold contract was down US$3.90 at US$2,928.70 an ounce and the March copper contract was up 11 cents at US$4.70 a pound.
— With files from The Associated Press
This report by The Canadian Press was first published Feb. 12, 2025.
Companies in this story: (TSX:GSPTSE, TSX:CADUSD)
Rosa Saba, The Canadian Press
