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Canada’s main stock index consolidated some recent gains on Tuesday as financial and energy shares lost ground, while investors weighed domestic inflation data that could support a shift to interest rate cuts over the coming months.

The S&P/TSX composite index ended down 136.50 points, or 0.7%, at 20,109.97, after posting on Monday its highest closing level since Sept. 18. U.S. indexes were also modestly lower.

“I think the market is taking a bit of a breather. It is working off some overbought levels,” said Brandon Michael, senior investment analyst at ABC Funds. “There was a slowdown in Canadian inflation and investors are now leaning towards (rate) cuts. It’s not a matter of if central banks are going to cut but its when and its how much. And that’s going to be a tailwind for stocks in the future.”

Canada’s annual inflation rate eased to 3.1% in October, close to expectations, and core inflation measures edged down to their lowest levels in about two years.

Money markets are betting that the Bank of Canada’s tightening campaign is at an end and the central bank will shift to rate cuts as soon as April.

The energy sector fell nearly 1% as oil settled 0.1% lower at US$77.77 a barrel. Heavily-weighed financials also ended lower, losing 0.9%, and consumer staples was down 1.7%.

Capital Power Corp shares were among the biggest decliners. They sank 6.3% after the company said it was acquiring two U.S.-based natural gas-fired generation facilities for US$1.1 billion.

The only major sector not to lose ground was materials. It added 0.7% as gold climbed 1.1%, approaching US$2,000 per ounce.

Canada’s main stock index is set to rise less than previously thought over the coming year as a slowdown in the global economy weighs on the outlook for corporate earnings, according to a Reuters poll released on Tuesday. The median prediction of 21 portfolio managers and strategists in the Nov. 10-20 poll was for the S&P/TSX Composite Index to advance 3.7% to 21,000 by the end of 2024, compared with 21,800 expected in a previous poll in August. It was then expected to climb to 22,000 by mid-2025, stopping just short of the record closing high set in March 2022 of 22,087.22.

On Wall Street, the S&P 500 and Nasdaq snapped five-session winning streaks as retailers declined after some disappointing outlooks and as technology shares fell.

Indexes stayed lower after minutes from the latest Federal Reserve meeting showed officials agreed to take a cautious approach to raising U.S. interest rates going forward.

U.S. central bank officials also said they would only raise interest rates if progress in controlling inflation faltered, according to minutes from the Oct. 31-Nov. 1 meeting.

Stocks had been rallying in recent sessions largely on the view that the Fed may be done hiking rates.

Shares of Nvidia, considered a leader in artificial intelligence chips, ended the regular session down 0.9%, and an index of semiconductors fell 1.9%.

Nvidia’s shares were down about 2% after the closing bell following the company’s quarterly report and guidance.

During the regular session, shares of Lowe’s Cos fell 3.1% after the home improvement chain projected a bigger drop in annual comparable sales than previously expected and trimmed its profit forecast for the year.

The Dow Jones Industrial Average fell 62.75 points, or 0.18%, to 35,088.29, the S&P 500 lost 9.19 points, or 0.20%, to 4,538.19 and the Nasdaq Composite dropped 84.55 points, or 0.59%, to 14,199.98.

The S&P 500 retail index was down 1.2% on the day.

Best Buy shares slipped 0.7% after the electronics retailer said it expects a steeper drop in annual comparable sales.

Kohl’s Corp shares dropped 8.6% after the company missed third-quarter sales estimates.

Volume on U.S. exchanges was 9.40 billion shares, compared with the 10.93 billion average for the full session over the last 20 trading days. Declining issues outnumbered advancing ones on the NYSE by a 1.76-to-1 ratio; on Nasdaq, a 2.29-to-1 ratio favored decliners. The S&P 500 posted 30 new 52-week highs and no new lows; the Nasdaq Composite recorded 56 new highs and 125 new lows.

Reuters, Globe staff

How markets and economists are reacting to today’s inflation data

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