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Canada’s main stock index was down slightly Tuesday and U.S. markets also fell, as investors continue to make guesses about when central banks on either side of the border will start cutting interest rates.

The S&P/TSX composite index was down 38.08 points at 21,217.53.

In New York, the Dow Jones industrial average was down 64.19 points at 38,563.80. The S&P 500 index was down 30.06 points at 4,975.51, while the Nasdaq composite was down 144.87 points at 15,630.78.

In Canada, where markets were coming off a holiday Monday, the big news was Statistics Canada’s latest consumer price index report. The data showed Canada’s annual inflation rate fell to 2.9 per cent last month, a steeper-than-expected deceleration in price growth.

The newest inflation reading suggests monetary policy in this country is having an impact on slowing the economy, and raises questions about how soon the Bank of Canada may be willing to pull the trigger on a rate cut.

The Bank of Canada has held its key rate steady at five per cent but many forecasters expect it could begin cutting interest rates around the middle of the year or even sooner.

“We’ll have to see what we hear from (Bank of Canada Governor) Tiff Macklem in a couple of weeks. We don’t expect there to be a rate cut at the (central bank’s) next meeting,” said Lesley Marks, chief investment officer with Mackenzie Investments.

“But certainly, at the following meeting in April, there’s a chance that the Bank of Canada could cut at that meeting.”

The Canadian dollar traded for 73.98 cents US compared with 74.16 cents US on Friday.

U.S. stocks also ended lower, with the Nasdaq showing the largest declines as chipmaker Nvidia stumbled ahead of its highly awaited earnings report, while gains in Walmart kept losses on the Dow Industrials in check.

Shares of the chip designer Nvidia tumbled 4.35 per cent, it’s biggest daily percentage fall since Oct. 17, while the broader Philadelphia semiconductor index declined 1.56 per cent as other chip stocks followed.

Investors are concerned whether Nvidia’s quarterly results, expected after markets close on Wednesday, will justify its expensive valuation, currently at a forward price-to-earnings ratio of just over 32, and continue to fuel the buying frenzy around artificial intelligence (AI) related stocks.

AI-fueled bets have helped Nvidia become the third-most valuable U.S. company and recently supplant Tesla as Wall Street’s most traded stock.

“It is priced to perfection, no matter what they say they are probably going to take money out of it,” said Ken Polcari, managing partner at Kace Capital Advisors in Boca Raton, Florida.

“No matter what they say, the traders are going to lock in profits, the asset managers are going to peel off a piece of their core position and lock in some profits and some of that is even happening today ahead of the number tomorrow.”

Shares in Super Micro Computer, which has surged in recent weeks as the latest stock seen to benefit from AI, fell 1.96 per cent, its second straight decline, after closing down nearly 20 per cent on Friday to snap a nine-session streak of gains.

The S&P 500 lost 30.06 points, or 0.60 per cent, to end at 4,975.51 points, while the Nasdaq Composite lost 144.87 points, or 0.92 per cent, to 15,630.78. The Dow Jones Industrial Average fell 64.19 points, or 0.17 per cent, to 38,56.80.

Walmart closed at a record high and was the best performer on the Dow Industrials after the U.S. retail giant forecast fiscal 2025 sales largely above Wall Street expectations and raised its annual dividend by 9 per cent.

The S&P 500 consumer staples index, which includes Walmart, rose 1.13 per cent as sole advancer of the 11 major S&P sectors, while information technology, down 1.27 per cent was the weakest.

Shares of fellow Dow component Home Depot alternated between modest gains and losses and before closing up 0.06 per cent after the home improvement retailer forecast full-year results below analysts’ estimates.

A weeks-long rally on Wall Street stalled last week, as hotter-than-expected U.S. inflation data pushed back market expectations for the timing of a rate cut from the Federal Reserve.

The rate cut is expected in June, according to a slim majority of economists polled by Reuters, who also flagged risk of a further delay in the first cut.

Investors are also awaiting the release of minutes from the Fed’s latest policy meeting as well as remarks from a slew of central bank officials later this week.

Smart-TV maker Vizio jumped 16.26 per cent after Walmart said it would buy the company for $2.3 billion.

Discover Financial Services shot 12.61 per cent higher on Warren Buffett-backed consumer bank Capital One’s plans to acquire the U.S. credit card issuer in a $35.3 billion deal. Capital One shares edged 0.12 per cent higher.

Declining issues outnumbered advancers by a 1.4 to 1 ratio on the NYSE, while on Nasdaq, decliners topped advancers by 1.9 to 1.

The S&P 500 posted 29 new 52-week highs and 3 new lows while the Nasdaq recorded 111 new highs and 95 new lows.

On U.S. exchanges 11.67 billion shares changed hands compared with the 11.64 billion moving average for the last 20 sessions.

Reuters and Canadian Press

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