Canadian Stocks Slump Amid Profit Taking, Inflation Report

(RTTNews) - Canadian stocks tumbled on Tuesday as traders resorted to profit taking from yesterday's gains as investors assessed the latest inflation report, which deflated expectations of a rate cut by the Canadian central bank.

After opening far below yesterday's close, the benchmark S&P/TSX Composite Index traded firmly negative throughout the session before finally settling at 29,888.82 down by 527.62 points (or 1.73%).

Three of the 11 sectors posted gains today with the real estate sector leading the pack.

Yesterday, the TSX index jumped by around 1.02%, lifted by gains in the materials sector, which benefitted from gold's record high gains.

Today, traders went on a profit-taking spree, causing the index to turn lower.

Further, data released by Statistics Canada today revealed that for the month of September, the year-on-year annual inflation rate in Canada rose to 2.4% from 1.9% in the previous month. For the same month, the CPI edged up 0.1% month-on-month, rebounding from a 0.1% decline in August.

Canada's annual core CPI measure, which is the Bank of Canada's favorite yardstick of inflation, increased to 2.8% in September from 2.6% in August, while month-on-month, it increased 0.2% in September.

For September, Canada's annual CPI median remained unchanged at 3.2% though annual CPI trimmed-mean increased by 3.1%.

These data follow yesterday's release of a business outlook survey conducted by Bank of Canada which revealed that more firms are now preparing themselves against a possible recession and hence hesitant to invest in hiring or growth.

In the backdrop of this report, investors' expectations that the Bank of Canada will trim the interest rate by 25 basis points to 2.25% at its upcoming meeting on October 29 still remains though not as high as before.

Reports in the media stated that Canada might soon ink a pact on steel and aluminum with the U.S. during the Asia-Pacifica Economic Cooperation summit, scheduled in South Korea later this month. On Canadian automobiles and softwood lumber, the U.S. is reportedly not yet prepared to make a deal.

When asked about this, Canadian Prime Minister Mark Carney merely stated that he does not want to overplay it.

Earlier this month, Carney visited Washington to meet U.S. President Donald Trump, but the talks did not yield any productive trade deal. There was no announcement on reduction of tariffs either.

To counter the job losses Canada is suffering due to the U.S. tariffs, union leaders and politicians have been urging Carney to impose retaliatory tariffs on the U.S. However, Carney responded negatively and emphasized that this is not the time for it.

Though the 35% U.S. tariffs have hit hard on Canada, the economy has been so far insulated from serious damages due to the Canada-United States-Mexico Agreement, a free-trade pact, that offers some cushioning to much of Canadian exports.

However, this agreement is also up for re-negotiation by mid-2026. Carney did not bring any good news on this front either after his recent U.S. trip.

The U.S.-China trade tensions started by China tightening its export of rare earth minerals to the U.S. and Trump retaliating by threatening new 100% tariffs is now showing signs of cooling off.

As this trade friction that helped lift gold prices and thereby Canada's materials sector stocks and consequently the index in recent days lost steam, gold prices went on a tailspin today.

As a result, the materials sector lost more than 8% today, pulling down the index.

In the U.S., the government shutdown entered day number 21 today.

With Republicans and Democrats at logger heads over passing a short-term funding bill, the impasse is likely to continue.

Expectations run high of a rate cut by the U.S. Federal Reserve at its upcoming October 28-29 meeting.

Investors are focused on the upcoming Asia-Pacific Economic Cooperation summit in South Korea and the Federal Reserve's monetary meeting, both scheduled for October month-end.

Major sectors that gained in today's trading were Real Estate (0.41%), Communication Services (0.24%), and Consumer Discretionary (0.06%).

Among the individual stocks, Choice Properties REIT (1.21%), Colliers International Group Inc (1.19%), Rogers Communication Inc (1.01%), and Magna International (3.02%) were the prominent gainers.

Major sectors that lost in today's trading were Energy (0.67%), IT (1.26%), Healthcare (1.69%), and Materials (8.19%).

Among the individual stocks, Aya Gold and Silver Inc (15.23%), Lundin Gold Inc (14.76%), Discovery Silver Corp (14.56%), Curaleaf Holdings Inc (4.76%), and Bitfarms Ltd (10.11%) were the notable losers.

Richelieu Hardware Ltd (3.23%) and Birchcliff Energy Ltd (2.26%) were among the prime market-moving stocks today.