Markets react to rising inflation and Trump's tariff moves, while Canada's TSX falls over 200 points
On Friday, Wall Street retreated from its all-time high, as US stock indexes fluctuated following mixed earnings reports from major companies, according to BNN Bloomberg.
The S&P 500 slipped by less than 0.1 percent after coming within 0.1 percent of its record the day before.
The Dow Jones Industrial Average fell 165 points, or 0.4 percent, while the Nasdaq composite gained 0.4 percent.
Despite the dip, the S&P 500 ended its first winning week in three, helped by reports showing companies earned higher-than-expected profits in late 2024.
These earnings helped markets stay resilient despite concerns over persistent inflation and high interest rates.
Several major stocks saw sharp movements. Airbnb surged 14.4 percent after reporting stronger-than-expected profits, driven by increased bookings.
Wynn Resorts gained 10.4 percent after exceeding earnings expectations, thanks to strong performance in Las Vegas.
On the downside, Applied Materials fell 8.2 percent. Despite reporting higher profits, the company provided a revenue forecast with a midpoint below Wall Street’s expectations.
At closing, the S&P 500 stood at 6,114.63, down 0.44 points. The Dow Jones Industrial Average dropped to 44,546.08, while the Nasdaq composite rose to 20,026.77.
Treasury yields declined after a report showed US retail sales fell more than expected in January.
Severe weather, including extreme cold in the South and wildfires in California, may have discouraged shoppers from visiting stores and auto dealerships.
Investors are watching economic data closely, hoping for a balance that prevents both a downturn and rising inflation. However, recent reports showed inflation unexpectedly accelerated in January.
The Federal Reserve remains cautious about cutting interest rates, as persistent inflation limits its ability to ease financial conditions.
The Fed aims to maintain inflation at 2 percent, but lowering interest rates too soon could fuel further price increases.
Concerns over new tariffs also weighed on markets.
President Donald Trump recently announced additional tariffs, which could add to inflationary pressures.
However, investors have not reacted strongly so far, viewing the tariffs as part of a negotiation strategy.
Brian Jacobsen, chief economist at Annex Wealth Management, noted that while some tariffs on Chinese goods have been implemented, others—including reciprocal tariffs and levies on steel, aluminum, and trade with Canada and Mexico—are still pending.
“That opens the door to negotiations,” he said.
Markets could become volatile if trade tensions escalate or if Trump intensifies tariff policies.
The 10-year Treasury yield dropped to 4.47 percent from 4.54 percent, continuing its fluctuations since the Federal Reserve began rate cuts in September.
While the Fed aimed to make borrowing cheaper and boost investments, long-term yields have moved in the opposite direction due to economic resilience and concerns over deficits and inflation.
Overseas markets saw varied performance. Hong Kong’s Hang Seng index jumped 3.7 percent, with technology stocks leading the gains. Tencent, Xiaomi, and Alibaba all saw strong rallies.
Canada’s main stock index fell more than 200 points on Friday, dragged down by energy and base metal stocks, according to BNN Bloomberg.
The S&P/TSX composite index closed at 25,483.23, down 215.28 points.
Investor concerns over Trump’s policies contributed to market uncertainty.
“Investors are having panic about what (US President Donald) Trump’s going to do over the weekend,” said Jennifer Tozser, senior wealth adviser and portfolio manager at Tozser Wealth Management with National Bank Financial Wealth Management.
She noted that ongoing uncertainty makes it difficult for businesses to plan ahead.
Trump’s latest executive order on reciprocal tariffs heightened concerns, especially with a tariff truce between the US and Canada set to expire in March.
Tozser said Canada’s economy, already slowing after interest rate hikes, could be further affected.
“It’s unknown if it’s going to be good or bad for the US economy, but there’s a lot of consensus that it’s going to be bad for everybody else,” she said.
Recent US inflation data showed stronger-than-expected price increases, and additional tariffs could push inflation even higher.
Tozser warned that the Federal Reserve has limited options to counteract tariff-driven inflation. “This is not something the Fed can effectively respond to,” she said.
The Bank of Canada expressed similar concerns in its latest report.
The summary of deliberations from its recent meeting stated, “Governing council members agreed that monetary policy cannot offset the long-term economic adjustment that permanent tariffs would cause. And in the short run, monetary policy cannot lean against lower growth and higher inflation at the same time.”
US retail sales also fell short of expectations, reflecting increased caution among consumers and businesses.
Tozser said many are adopting a more cautious approach due to economic uncertainty.
Earnings season continued in both Canada and the US, with some Canadian companies warning about tariff-related risks. Magna Inc. noted that tariffs could impact its business operations.
The Canadian dollar traded at 70.59 cents US, up from 70.21 cents US on Thursday.
The April crude oil contract fell 43 cents to US$70.71 per barrel, while the March natural gas contract rose 10 cents to US$3.73 per mmBTU.
Gold prices declined, with the April gold contract down US$44.70 to US$2,900.70 per ounce. Copper prices also dropped, as the March copper contract fell 11 cents to US$4.66 per pound.
