Stocks end lower as investors turn cautious ahead of interest rate decisions

U.S. and Canadian major indexes ended lower in choppy trading on Tuesday as caution set in ahead of anticipated interest rate cuts from both the Federal Reserve and Bank of Canada.

Investors are largely still pricing in a 25 basis-point cut from the U.S. central bank at the conclusion of its two-day meeting on Wednesday, to offset the deterioration in the U.S. labour market, evidenced by numerous recent economic indicators. Data on Tuesday showed that U.S. retail sales increased more than expected in August, but that did little to change rate cut expectations.

“Any kind of resilient economic data will only reaffirm the hawks on the FOMC … and could give a little bit of fuel for (Fed Chair Jerome) Powell to come out as slightly more hawkish than the market is hoping for,” said Ross Mayfield, investment strategist at Baird Private Wealth Management.

Investors and economists are also widely expecting a 25 basis point cut by Canada’s central bank on Wednesday. Adding to rate-cut expectations, Canadian consumer prices increased at an annual rate of 1.9% in August, falling short of the 2% pace that economists had forecast.

Traders brushed off news Tuesday that the U.S. Senate confirmed White House economic adviser Stephen Miran to the Fed Board and an appeals court rejected President Donald Trump’s bid to fire Fed Governor Lisa Cook.

The Dow Jones Industrial Average fell 125.55 points, or 0.27%, to 45,757.90, the S&P 500 lost 8.52 points, or 0.13%, to 6,606.76 and the Nasdaq Composite lost 14.79 points, or 0.07%, to 22,333.96.

Six of the 11 S&P 500 subsectors ended lower. The utilities and real estate sectors fell 1.81% and 0.66%, respectively.

The S&P 500 and the Nasdaq closed at all-time highs on Monday after hitting intraday records in multiple sessions. The three main indexes had gained so far in September – a month traditionally deemed bad for U.S. equities.

The S&P/TSX composite index ended down 115.79 points, or 0.4%, at 29,315.23, after posting a record closing high also on Monday.

The materials group lost 1.9%, giving back some recent gains. Canadian Industry Minister Melanie Joly said she will be meeting the CEOs of Anglo American and Teck Resources Ltd next week to discuss their proposed merger. Shares of Teck ended 4.3% lower.

Consumer staples fell 0.7% and consumer discretionary ended 0.9% lower. Just two of 10 major TSX sectors ended higher, including energy. It was up 2.5% as the price of oil settled 1.9% higher at US$64.52 a barrel. Traders weighed the possibility that Russian oil supplies may be disrupted by Ukrainian drone attacks on its ports and refineries.

On Wall Street, UnitedHealth Group shares fell 2.3% and Nvidia shares dropped 1.6%, weighing on the Dow. Nvidia shares fell after Reuters reported weak demand in China for its new AI chip.

Webtoon Entertainment soared 39% after a deal with Disney to create a new digital comics platform to feature content from Disney’s portfolio, including the Marvel and “Star Wars” franchises.

Oracle rose 1.5% after Trump said that the U.S. and China have a deal that will keep the short-video app TikTok operating in the U.S. and multiple news outlets, citing sources, said Oracle is part of the investor consortium.

On the Nasdaq, advancing issues outnumbered decliners by a 1.01-to-1 ratio. Declining issues outnumbered advancers by a 1.07-to-1 ratio on the NYSE. The S&P 500 posted 15 new 52-week highs and 13 new lows while the Nasdaq Composite recorded 89 new highs and 58 new lows. Volume on U.S. exchanges was 17.11 billion shares, compared with the 16.31 billion average for the full session over the last 20 trading days.

How today’s inflation report has shifted market and economist predictions for BoC rate cuts

Reuters, Globe staff