Canada’s main stock index rose on Tuesday to a record high, with the materials and technology sectors leading broad-based gains as optimism rose that the U.S. Federal Reserve would cut interest rates in September.
The index was playing catch-up with Wall Street after the Canadian market holiday on Monday. U.S. stocks rallied sharply on Monday, bouncing back from Friday’s drubbing, but retreated again on Tuesday.
The S&P/TSX composite index ended up 549.65 points, or 2%, at 27,570.08, after three straight days of declines. It was the biggest gain since April 11 and eclipsed the record closing high that was posted last Tuesday.
Investors see a roughly 95% chance the Fed will ease next month after the release of downbeat U.S. jobs data on Friday.
“People see (the U.S. unemployment numbers) as being the rationale for a reduction in interest rates at the Fed, and that’s essentially positive for stock markets,” said Thomas Caldwell, chairman at Caldwell Securities. “Earnings are coming across fairly well and so the world is moving on, but there’s this undercurrent of what will be the longer-term damage of tariffs and this upending of world trade.”
In domestic economic news Tuesday, Canada’s merchandise trade deficit widened in June to C$5.9 billion as imports grew faster than exports due to a one-time high-value oil equipment import. Canada will provide up to C$1.2 billion to help softwood lumber producers deal with U.S. countervailing and anti-dumping duties, Prime Minister Mark Carney said.
The material sector, which includes lumber producers as well as fertilizer companies and metal mining shares, jumped 5.6% as the price of gold edged higher.
Technology was up 3%, with e-commerce platform Shopify Inc adding more than 7% ahead of the release of its quarterly earnings report on Wednesday.
All ten major sectors on the TSX posted gains, with both industrials and heavily weighted financials adding 1.2%.
In the U.S., investors weighed the impact of tariffs after Yum Brands and other companies cited trade duties in their results or outlooks.
The U.S. trade deficit narrowed in June on a sharp drop in consumer goods imports, and the trade gap with China shrank to its lowest in more than 21 years.
In addition, a measure of activity in the U.S. services sector hit stall-speed in July, with businesses saying new import taxes are pushing costs higher.
Shares of KFC parent Yum Brands fell 5.1% after the company missed estimates for the second quarter, as steep trade duties restricted consumer spending.
Caterpillar warned U.S. tariffs would pose significant challenges in the second half of the year and cost it up to US$1.5 billion in 2025, but its shares ended up 0.1%.
The comments come at the tail end of the U.S. second-quarter earnings season, in which about 80% of reports from S&P 500 companies are beating analyst profit expectations.
The Dow Jones Industrial Average fell 61.90 points, or 0.14%, to 44,111.74, the S&P 500 lost 30.75 points, or 0.49%, to 6,299.19 and the Nasdaq Composite lost 137.03 points, or 0.65%, to 20,916.55.
The S&P 500 and Nasdaq hit a string of record highs recently, and the S&P 500 remains up 7.1% for the year so far.
Trump on Tuesday said the U.S. could impose a “small tariff” on pharmaceutical imports before increasing the rate subsequently. He also signaled an announcement on tariffs on semiconductors and chips in the “next week or so.”
In other results-related news, Marriott International cut its full-year forecast for revenue growth and profit and signaled slowing travel demand and economic uncertainties. Its stock closed up 0.2%.
While the earnings period is winding down, investors look forward to more key results on Wednesday, with both Walt Disney and McDonald’s due to report.
Advancing issues outnumbered decliners by a 1.27-to-1 ratio on the NYSE. There were 158 new highs and 67 new lows on the NYSE. On the Nasdaq, 2,216 stocks rose and 2,365 fell as declining issues outnumbered advancers by a 1.07-to-1 ratio. Volume on U.S. exchanges was 16.29 billion shares, compared with the roughly 18.33 billion average for the full session over the last 20 trading days.
Reuters, Globe staff
