S&P/TSX composite down, U.S. markets mixed ahead of tech earnings and economic data

Canada’s main stock index erased its gains from the day before as industrial and telecom stocks weighed on the market, while U.S. markets were mixed.

The S&P/TSX composite index closed down 138 points at 21,873.72.

In New York, the Dow Jones industrial average was down 42.77 points at 38,460.92. The S&P 500 index was up 1.08 points at 5,071.63, while the Nasdaq composite was up 16.11 points at 15,712.75.

Markets were off to a better start in the morning thanks to earnings from Tesla the evening before, but uncertainty over interest rates overtook earnings optimism as the day went on, said Pierre-Benoît Gauthier, assistant vice-president of investment strategy at IG Wealth Management.

“We have a good earnings season so far, but the rates are just spoiling the party,” said Gauthier.

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“I think that people are just on edge.”

Treasury yields rose ahead of two pivotal days for markets, with earnings from several of the biggest technology companies on the roster as well as U.S. GDP and the personal consumption expenditures index.

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“We will have a really good sense of first, where we’re going with growth and results, and where we’re going with … the overall economy in the U.S. and inflation,” said Gauthier.

Most of the U.S. companies that have reported earnings so far this season have beat expectations, which have themselves “vastly” improved over the past couple of quarters, said Gauthier.

“It shows that there is strength … people are still out there spending,” he said.

“How much of that is already priced in is now the big question.”

Inflation data in the U.S. has continued to surprise to the upside and put a damper on markets as investors’ hopes for interest rate cuts keep getting pushed further and further down the road.

After several such surprises in a row, investors are forced to adjust their expectations, said Gauthier.

In Canada, however, rate cuts are likely around the corner, he said, with increasing evidence that the Bank of Canada will soon diverge from the U.S. Federal

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Reserve and start cutting first. That could put downward pressure on the loonie’s value, he said.

A summary of the deliberations leading up to the Bank of Canada’s latest interest rate decision shows members of the governing council were split on how long the central bank should wait before it starts cutting interest rates. The bank held its key rate steady in April but indicated a cut was possible in June.

The Canadian dollar traded for 72.94 cents US compared with 73.14 cents US on Tuesday.

The June crude oil contract was down 55 cents at US$82.81 per barrel and the May natural gas contract was down 16 cents at US$1.65 per mmBTU.

The June gold contract was down US$3.70 at US$2,338.40 an ounce and the July copper contract was up three cents at US$4.46 a pound.

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