Canadian Stocks Fall on BoC and Fed Suspense

                                                                  Source: Krish Capital Pty Ltd

Index Update:

Canadian stocks declined on Tuesday as cautious investors refrained from major bets ahead of the interest rate decisions by the Bank of Canada as well as the US Federal Reserve, although data from both nations support lowering rates.

After opening just below yesterday's close, the benchmark S&P/TSX Composite Index immediately lost momentum to trade firmly negative throughout the session and finally close at 29,315.23, down by 115.79 points (or 0.39%).

Macro Update:

Data released by Canada Mortgage and Housing Corporation today revealed that housing starts in Canada declined 16% in August to 245,791 units from a revised 293,537 in July.

Data released by Statistics Canada today revealed that the annual inflation rate in Canada rose to 1.9% in August from 1.7% in July. On a seasonally adjusted monthly basis, the CPI rose 0.2% in August.

With interest rates currently at 2.75%, traders believe the likelihood of the Bank of Canada cutting interest rates tomorrow is much higher against the backdrop of today's inflation data.

In the US, the two-day FOMC meeting to decide on interest rates began today. Recent jobs and inflation numbers from the US have added fuel to expectations of a rate cut announcement tomorrow.

Top Movers:

Among the individual stocks, Baytex Energy Corp (9.48%), Tourmaline Oil Corp (4.71%), Whitecap Resources Inc (4.51%), Parex Resources Inc (3.74%), Bitfarms Ltd (17.01%), and Computer Modelling Group Ltd (4.35%) were the prominent gainers.

Our Stance:

The index is currently testing a key support zone near 29,100, which will be critical for sustaining the upward trajectory. A decisive break below this level could open the door for a deeper retracement toward 28,800 and 28,600, while holding above these supports would be essential to maintaining the near-term bullish bias.

Commodity Update:

The U.S. dollar hovered near four-year lows against the euro and a one-month low against the yen as markets awaited a widely expected 25-basis-point rate cut by the Fed. Focus shifts to Chair Powell’s comments for cues on the pace of easing, with 67.9 bps of cuts priced in for year-end. Gold slipped 0.14%, silver 1.28%, and copper 0.44%. Brent crude eased 0.10% after recent gains on Russian supply concerns.

Technical Update:

The S&P/TSX Composite Index declined 115.79 points, or 0.39%, on Tuesday to close at 29,315.23, pressured by a 4.47% drop in healthcare stocks. Despite this pullback, the broader technical outlook remains constructive, with the index holding above its 21-period SMA, reinforcing the prevailing bullish trend. Momentum indicators are supportive, as the RSI stands elevated at 73.55, highlighting strong underlying strength. The index is currently testing a key support zone near 29,100, which will be critical for sustaining the upward trajectory. A decisive break below this level could open the door for a deeper retracement toward 28,800 and 28,600, while holding above these supports would be essential to maintaining the near-term bullish bias.