Canadian stocks moved lower during trading on Tuesday

Image Source : Krish Capital Pty Ltd

Index Update:  The S&P/TSX Composite Index edged down 0.10% to 26,541.39 on Tuesday as rising Middle East tensions and President Trump’s aggressive stance on Iran pushed investors toward safe-haven assets. Despite Iran’s behind-the-scenes ceasefire lobbying, market sentiment remained cautious. Domestically, PM Mark Carney jolted markets by announcing plans with Trump to finalize a new economic and security pact within 30 days.

Macro Update:  Dollar Softens, Yields Steady: The US dollar index pulled back to 98.6, paring Tuesday’s safe-haven rally as markets await Fed guidance. Meanwhile, the 10-year Treasury yield held near 4.4%, after dipping Tuesday on geopolitical tensions and softer-than-expected retail sales.

Fed in Focus, Rates Likely on Hold:  The Federal Reserve is widely expected to keep its benchmark rate unchanged at 4.25%–4.50% for the fourth straight meeting. Attention will shift to the updated economic projections and the dot plot, especially after April’s sweeping tariffs and ongoing geopolitical risks. Inflation data remains stable, with headline CPI at 2.4% and core at 2.8%, while unemployment has held steady despite a job growth slowdown.

Middle East Tensions Escalate:  Israel and Iran exchanged fire for a sixth straight day, with the U.S. aiding Israel’s defense systems. President Trump called for Iran’s “unconditional surrender” and deployed the USS Nimitz early to the region. Satellite images revealed Israeli strikes damaged Iran’s Natanz nuclear facility, while Iran prepares potential retaliatory missile strikes against U.S. interests if conflict deepens.

G7 Rift Widens Over Trump’s Diplomacy:  At the G7 summit in Canada, Trump’s unpredictable diplomacy left other leaders unsettled. Tensions were especially clear over proposed sanctions on Russia, which failed to gain traction during a group dinner. Trump also exited early to monitor the Middle East crisis.

Top Movers:  The biggest gainers of the session on the S&P/TSX Composite were Baytex Energy Corp (TSX: BTE), which rose 5.49%. International Petroleum Corp (TSX: IPCO) added 5.14% and Algoma Steel Group Inc (TSX: ASTL) was up 4.50%.

Our Stance:  The index remains in a bullish trend, continuing to trade above its 21-period Simple Moving Average (SMA) a sign of favourable market conditions. The Relative Strength Index (RSI) is at 67.53, reflecting solid market strength and leaving room for further potential gains. At present, the index is testing a key support level of around 26,200.

Commodity Update:  The U.S. dollar remained firm against major currencies on Wednesday, supported by safe-haven demand amid rising tensions between Israel and Iran. Investors remained cautious ahead of the Federal Reserve's interest rate decision. Meanwhile, gold edged down 0.15% to $3,401.45, silver rose 0.09% to $37.24, and copper gained 0.16% to $9,693.55. Brent crude climbed 0.25% to $76.64, extending gains on supply concerns from the Middle East conflict.eased 0.10% to $66.43 ahead of China’s upcoming economic data.

Technical Update:  On Tuesday, the S&P/TSX Composite Index recorded a modest decline, slipping 27.22 points, or 0.10%, to close at 26,541.39. A significant drag on the session was the healthcare sector, which fell by 2.45%. From a technical standpoint, the index remains in a bullish trend, continuing to trade above its 21-period Simple Moving Average (SMA) a sign of favourable market conditions. The Relative Strength Index (RSI) is at 67.53, reflecting solid market strength and leaving room for further potential gains. At present, the index is testing a key support level of around 26,200. Holding above this threshold is essential for sustaining upward momentum. A break below 26,200 could signal a risk of retracement, with the weekly chart highlighting critical support levels in the 25,800–25,500 range. To maintain the bullish trajectory, the index must stay above these levels, supporting continued growth potential in the near term.