TORONTO — Canada's main stock index closed higher Wednesday as the Bank of Canada cut its key lending rate, while U.S. stock markets dipped as the U.S. Federal Reserve kept its rate unchanged.
The continued divergence in rates came as worries about the softened labour market and the risk of tariffs weigh on the economic outlook in Canada, especially compared with the stronger showing of the U.S. economy.
But with the rate decisions coming in as expected, other pressures like tech valuation uncertainty in the U.S. over Chinese AI progress also influenced the market, said Brianne Gardner, senior wealth manager of Velocity Investment Partners at Raymond James Ltd.
"We're still seeing a little bit of that selloff on the big tech names that have dipped still from that Monday news," she said.
The selloff Monday, sparked by news about a Chinese company's large language model called DeepSeek, has prompted some to take profits from big tech companies after a strong run through 2024, said Gardner.
"It's not a bad time to see a little bit more broadening out and rotation into some of the other sectors."
Nvidia was down just over four per cent, while Microsoft fell just over one per cent, helping pull the Nasdaq composite down 101.26 points to 19,632.32. The Dow Jones industrial average closed down 136.83 points at 44,713.52. The S&P 500 index was down 28.39 points at 6,039.31.
The S&P/TSX composite index closed up 53.85 points at 25,473.30, helped by commodity stocks despite some mixed showings for fuel and metal prices.
The energy index for the TSX was up 1.2 per cent and the base metal index rose 1.4 per cent, while telecoms and utilities fell.
The further drop in the Bank of Canada rate should help the economy, which still isn't getting the full boost from recent bigger cuts, said Gardner.
"Cuts do take time to flow through the economy, so I don't think we'll start feeling the full impact of the Bank of Canada's rate cuts until kind of the summer."
The threat of U.S. tariffs on Canadian goods, which U.S. President Donald Trump said could come as soon as Feb. 1, is creating uncertainty, but many are holding off on reacting so far, said Gardner.
"There's definitely some noise and concerns about what that impact looks like ... it's a lot of wait and see, is what's happening right now."
The Canadian dollar traded for 69.28 cents US compared with 69.47 cents US on Tuesday. The move came as the Bank of Canada lowered its key interest rate by a quarter of a percentage point to three per cent, with more cuts expected ahead this year.
The March crude oil contract was down US$1.15 at US$72.62 per barrel and the March natural gas contract was up five cents at US$3.17 per mmBTU.
The April gold contract was down US$1.10 at US$2,793.50 an ounce and the March copper contract was up three cents at US$4.28 a pound.
This report by The Canadian Press was first published Jan. 29, 2025.
Companies in this story: (TSX:GSPTSE, TSX:CADUSD)
Ian Bickis, The Canadian Press
