TSX ekes out gain Wednesday, U.S. stocks also gain ahead of inflation data

TORONTO Canada's main stock index eked out a gain Wednesday, weighed down by weakness in energy and metals, while U.S. markets rose ahead of the much anticipated inflation data coming Thursday, and the start to earnings season on Friday. Investors appeared broadly optimistic ahead of the inflation release, said Michael Currie, senior investment adviser at TD Wealth.

The data could have implications for the U.S. Federal Reserve’s monetary policy, as talk in 2024 centres around when and by how much central banks will cut interest rates, said Currie. “I think people are a little bit more optimistic that maybe the worst is behind them,” he said, adding that January is usually a strong time of year for markets.

“The mood, I'd say, is a lot more positive than I've seen in a long time.” The S&P/TSX composite index closed up 18.44 points at 20,989.42. In New York, the Dow Jones industrial average was up 170.57 points at 37,695.73. The S&P 500 index was up 26.95 points at 4,783.45, while the Nasdaq composite was up 111.94 points at 14,969.65.

Markets appear to expect several more interest rate cuts than the three the Fed has signalled, Currie said. That may be a combination of markets getting a little ahead of themselves but also the central bank keeping its messaging hawkish to avoid sparking too much optimism, he added. What’s surprised Currie is just how quickly bond yields have come down in the U.S.

and Canada since their highs last fall. “We haven't actually had a rate cut yet on either side of the border. But the market’s already acting like it's been cut three, four times. I mean, it’s been dramatic,” he said. “It's full steam ahead on rate cuts, and it's just a matter of how many.

No one is betting against them.” On Friday, U.S. earnings reports for the fourth quarter of 2023 begin rolling in, starting with the major banks. These often have a big effect on the market since they can be an indicator of how the consumer is doing, said Currie. Energy was the worst sector Wednesday, amid otherwise broad based strength, noted Currie.

Oil was down for the day amid ongoing volatility in crude prices as concerns over supply and demand play tug of war. The main catalyst for the decline this time was a surprise increase in U.S. oil inventories, said Currie, when inventories were expected to have declined. The Canadian dollar traded for 74.73 cents UScompared with 74.68 cents US on Tuesday.

The February crude oil contract was down 87 cents at US$71.37 per barrel and the February natural gas contract was down 15 cents at US$3.04 per mmBTU. The February gold contract was down US$5.20 at US$2,027.80 an ounce and the March copper contract was up two cents at US$3.78 a pound. This report by The Canadian Press was first published Jan.

10, 2024. Companies in this story: (TSX:GSPTSE, TSX:CADUSD).