Canada’s main stock index gained almost 200 points Friday, while U.S. markets were mixed.
After a rally provoked by stellar earnings from AI darling Nvidia last week, investors spent most of the day selling off and rotating into sectors like real estate, energy and utilities, said Brian Madden, chief investment officer with First Avenue Investment Counsel.
“People are selling the news in tech and rotating into other things that are more bond sensitive or that may have just been laggards,” he said.
The latest reading on U.S. inflation, the Personal Consumption Expenditures index, came in about as expected Friday.
The report doesn’t change expectations for interest rate cuts in the U.S. in either direction, said Madden.
Investors have been eyeing a potential start to cuts in the fall, as stronger-than-expected interest rates have tempered expectations for just how many cuts the year will bring.
In Canada, the latest GDP report was softer than expected, and also saw the fourth quarter revised lower.
“You’ve got a Canadian economy that’s really flatlining,” said Madden. Increasingly, the evidence is in favour of the Bank of Canada cutting as early as next week, he said. If not June, then a cut is certain in July, he added.
“The Canadian GDP data, that’s going to be really the last data point the Bank of Canada will have at hand to consider.”
The report tips the chances of a cut higher, said Madden, “but it’s not a slam dunk.”
With the major banks done reporting earnings, it’s been a “mixed bag,” said Madden. The banks are putting aside money for bad loans as consumer stress rises, but are doing well in their capital markets and wealth management units, he said.
The Canadian dollar traded for 73.33 cents US compared with 73.11 cents US on Thursday.
The July crude contract was down 92 cents at US$76.99 per barrel and the July natural gas contract was up two cents at US$2.59 per 1,000 cubic feet.
The August gold contract was down US$20.70 at US$2,345.80 an ounce and the July copper contract was down six cents at US$4.60 a pound.
— With files from The Associated Press
