TSX drops by 140 points, U.S. markets weighed down by fresh economic data

TORONTO — Telecom, financial and utilities stocks led Canada’s main stock index down on Thursday even as the price of oil rose, while U.S. markets eased lower as well after several economic reports.

The S&P/TSX composite index closed down 140.26 points at 21829.85.

In New York, the Dow Jones industrial average was down 137.66 points at 38905.66. The S&P 500 index was down 14.83 points at 5150.48, while the Nasdaq composite was down 49.24 points at 16128.53.

“I think it’s a good day for a pause,” said Ashish Utarid, assistant vicepresident of investment strategy with IG Wealth Management.

“We have new data that’s come out. And investors themselves are taking a bit of profit … we’ve seen a really good rally.”

One highly anticipated report showed that inflation at the wholesale level was hotter than expected last month, while another showed that shoppers spent less at the retail level than anticipated.

The consumer is still challenged as prices continue to rise, said Utarid, though the U.S. consumer has been more resilient than the Canadian consumer.

“The effect of higher interest rates [hasn’t] hit that borrower in the United States,” said Utarid, at least not to the same extent.

That’s largely due to the differences in the U.S. housing market, where mortgage terms are much longer than Canada’s, meaning fewer consumers have seen their mortgages turn over to higher rates.

Canada has so far dodged a technical recession, said Utarid.

“That allowed the Bank of Canada to continue their pause,” he said.

But interest rate cuts would help stimulate the economy, he said.

However, even if the Bank of Canada cuts sooner than the U.S. Federal Reserve, it won’t be by much, he said.

“It’s a combination of things. If they cut rates too soon, our imports become more expensive, which can be inflationary,” said Utarid. “It also takes a little bit more time … for the effect of that lower rate to trickle into the economy.”

“So they could move theoretically a month before, but if the U.S. continues to grow, and we’re looking at the Fed lowering rates in the latter half of the year, July and August, then we could be with a depressed dollar for quite some time.”

The benefits of starting cuts a little earlier are largely outweighed by the potential negative effects, said Utarid.

Meanwhile, expectations for rate cuts in 2024 in the U.S. have been halved since the beginning of the year. The Fed has signalled that the trend of lowering inflation won’t be a smooth one. So far expectations are that it could start cutting in June.

The TSX underperformed relative to its U.S. peers Thursday as financial stocks weighed the index down. In general, stocks that may be pressured by rates staying higher were responsible for the decline, said Utarid, even as oil prices rose, which often means an uptick in energy stock prices.

The Canadian dollar traded for 74.01 cents US compared with

74.23 cents US on Wednesday.

The April crude oil contract was up $1.54 US at $81.26 US per barrel and the April natural gas contract was up eight cents at $1.74 US per mmBTU.

The April gold contract was down $13.30 US at $2,167.50 US an ounce and the May copper contract was down one cent at $4.05 US a pound.