Canada’s main index advanced on Wednesday for a third straight day as higher commodity prices boosted the shares of energy and metal mining companies. U.S. stocks, however, mostly edged lower as investors took profits in shares of Nvidia and other chipmakers, while they braced for producer price data on Thursday and further clues on inflation.
The S&P/TSX composite index ended up 139.09 points, or 0.6%, at 21,970.11, its highest closing level since April 2022. It needs only 117 more points to set a new all-time record high close.
The energy index rose 1.7 per cent.
U.S. oil inventories were lower, driving oil prices higher, said Jennifer Tozser, senior wealth adviser and portfolio manager with Tozser Wealth Management at National Bank Financial. The April crude oil contract rose US$2.16 on Wednesday, reaching US$79.72 per barrel.
In New York, the Dow Jones industrial average was up 37.83 points at 39,043.32. The S&P 500 index was down 9.96 points at 5,165.31 after setting another all-time high on Tuesday.
The Nasdaq composite was down 87.87 points at 16,177.77 as markets were weighed down by losses from some of the most influential stocks, including Nvidia, which was down more than one per cent.
As investors await more U.S. inflation data Thursday after a slightly above-expectations CPI report Tuesday, Tozser said central banks are walking a thin line -- especially in Canada.
Investors are looking for data that will support the central banks cutting interest rates, she said, but she thinks some weakness has been masked by economic resilience and a strong showing in equities, particularly U.S. stocks.
The TSX, without exposure to the major tech companies that have driven an extensive, narrow rally over the past several months, has been lagging behind its U.S. peers.
Higher rates can actually contribute to inflation over time by raising shelter prices, said Tozser.
“The Canadian economy can’t tolerate it,” she said, noting that Canada’s housing market didn’t have the same correction as its neighbour to the south during the 2008 crisis.
But despite the differences between the two economies, the Bank of Canada has tended to more or less mirror the U.S. Federal Reserve’s rate decisions, said Tozser.
The U.S. central bank is set to report its latest rate decision next week, but is expected to keep holding its key interest rate like the Bank of Canada did earlier this month. Tozser expects the bank to keep with its data-dependent messaging.
Markets largely expect the Fed to start cutting in June.
Interest rates will continue to be the main driver for investors throughout 2024, said Tozser.
The Canadian dollar traded for 74.23 cents US compared with 74.08 cents US on Tuesday.
The April natural gas contract was down six cents at US$1.66 per mmBTU.
The April gold contract was up US$14.70 at US$2,180.80 an ounce and the May copper contract was up 13 cents at US$4.06 a pound.
Reuters, The Canadian Press, Globe staff
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