TORONTO 鈥� sa国际传媒's main stock index lost more than two per cent on Tuesday on a broad-based decline, following U.S. markets as they slid on news that inflation in January was hotter than expected.聽
U.S. prices rose 3.1 per cent compared with January 2023, lower than December鈥檚 annual rate but higher than economists expected.聽
鈥淭he CPI print this morning just reminded everyone that getting to two per cent was not going to be as easy as they previously thought,鈥� said Pierre-Beno卯t Gauthier, assistant vice-president of investment strategy at IG Wealth Management.
鈥淭he market is reacting really strongly.鈥�
The reaction, however, wouldn鈥檛 have been as dramatic if U.S. markets hadn't already been hovering at record heights, Gauthier said.聽
鈥淎t some point, the market ... was looking for a reason to sell off a little,鈥� he said.聽
Gauthier also noted that U.S. markets are still up year-to-date: 鈥淚t鈥檚 not like we are in free-fall or anything.鈥澛�
The S&P/TSX composite index closed down 482.33 points, or 2.3 per cent, at 20,584.97.
In New York, the Dow Jones industrial average was down 524.63 points, or 1.4 per cent, at 38,272.75.The S&P 500 index was down 68.67 points, or 1.4 per cent, at 4,953.17, while the Nasdaq composite was down 286.95 points, or 1.8 per cent, at 15,655.60.
Rate cut expectations in the U.S., already curbed from recent optimistic highs, continued to scale back on Tuesday.聽
Now, markets are pricing in three or four cuts for all of 2024 from the U.S. Federal Reserve, down from five or six just a few weeks ago, said Gauthier. That鈥檚 much closer to the three cuts the Fed previously said it expects to make.
鈥淵ou could say that the bond market is waking up to the reality of, 鈥榙on't fight the Fed,鈥欌�� said Gauthier.聽
Canadian markets followed their U.S. neighbours down on Tuesday, even though the TSX has been lagging behind in recent months. Rate expectations were also pushed back in sa国际传媒, said Gauthier.聽
鈥淭he markets right now appear to be treating the U.S. and sa国际传媒 as one,鈥� he said.聽
While Canadian markets tend to follow the U.S., Gauthier said he was surprised they followed so closely this time around given the two economies have diverged considerably throughout the fight against inflation.
鈥淭he Bank of sa国际传媒 would prefer ... to follow the Fed, but at some point, they might need to diverge.鈥澛�
The Canadian dollar traded for 73.77 cents UScompared with 74.35 cents US on Monday.
The March crude oil contract was up 95 cents at US$77.87 per barrel and the March natural gas contract was down eight cents at US$1.69 per mmBTU.
The April gold contract was down US$25.80 at US$2,007.20 an ounce and the March copper contract was down a cent at US$3.71 a pound.
-- With files from The Associated Press
This report by The Canadian Press was first published Feb. 13, 2024.
Companies in this story: (TSX:GSPTSE, TSX:CADUSD)聽
Rosa Saba, The Canadian Press
