TSX inches up, U.S. markets fall as high inflation persists

TORONTO — Canada’s main stock index eked out a gain Thursday thanks to energy and base metals, while U.S. stock markets fell, though they managed to pare back deeper losses from the morning.

Markets were rattled in the morning after fresh economic data presented the possibility of a “worst-case scenario” — that inflation could remain sticky even as interest rates weigh on growth, said Macan Nia, co-chief investment strategist at Manulife Investment Management.

The data suggested the U.S. economy’s growth slowed during the first three months of 2024 to a 1.6-per-cent annual rate from 3.4 per cent at the end of 2023, but also said inflation was hotter during those three months than economists forecast.

“It introduces this notion of this stagflationary environment, which is the worst of both worlds,” said Nia.

The S&P/TSX composite index closed up 11.66 points at 21885.38.

In New York, the Dow Jones industrial average was down 375.12 points at 38085.80. The S&P 500 index was down 23.21 points at 5048.42,while the Nasdaq composite was down 100.99 points at 15611.76.

Markets took the data hard, Nia said. “We will be focusing more on that narrative moving forward, because that seed was planted this morning.”

The mixed data doesn’t help investors much in their efforts to figure out when the U.S. Federal Reserve could cut interest rates, said Nia. Most of the cuts priced in for 2024 at the beginning of the year are now off the table, he noted.

That’s in comparison with Canada, where it seems much more certain that cuts will begin this summer, said Nia.

Earnings were also in focus Thursday as Meta, one of the big tech names that’s been driving market growth this year, reported strong first-quarter profits but offered lukewarm revenue guidance.

Meta’s stock price fell 10.6 per cent to $441.38 US.

Optimism around artificial intelligence meant companies like Meta were driving the majority of the market return heading into this year, said Nia.

“As we entered this year, and throughout the first bit of this year, you’ve seen a little bit of a broadening of the performance,” he said.

The Canadian dollar traded for 73.05 cents US compared with

72.94 cents US on Wednesday.

The June crude oil contract was up 76 cents at $83.57 US per barrel and the May natural gas contract was down a penny at $1.64 US per mmBTU.

The June gold contract was up $4.10 US at $2,342.50 US an ounce and the July copper contract was up six cents at $4.54 US a pound.