Canadian stocks slumped on Wednesday

Index Update:  Canadian stocks fell on Wednesday, reversing gains from the previous day, as a sharp drop in gold prices dragged down the materials sector. Investors also reacted cautiously ahead of monetary policy decisions from the Bank of Canada and the U.S. Federal Reserve. The benchmark S&P/TSX Composite Index  traded firmly negative before settling at 32,312.67, down by 616.42 points (or 1.87%).

Macro Update:  Statistics Canada's data showed that the year-on-year inflation rate fell to 1.80% in February from 2.30% in January, while month-on-month, it increased 0.50%. Annual core inflation fell to an 11-month low of 2.30% in February from 2.60% in January, while month-on-month it rose 0.40%. In line with market expectations, the Bank of Canada kept interest rates at the current level of 2.25%, citing the uncertainty due to the Middle East conflict as the primary reason. Of note, this is the third consecutive time the BoC chose to leave the benchmark rate unchanged. The central bank's next interest rate announcement is scheduled for April 29. BoC Governor Tiff Macklem stressed that if fuel prices stoke inflation further, the bank may raise borrowing costs. The crucial Canada-United States-Mexico Agreement, a free-trade pact, is coming up for renewal in a few months.

Top Movers:  Among the individual stocks Vermilion Energy Inc (3.21%), Parex Resources Inc (2.80%), Cenovus Energy Inc (1.83%), and Suncor Energy Inc (1.21%) were the prominent gainers.

Our Stance: Momentum indicators remain slightly weak, with the 14-period Relative Strength Index (RSI) at 38.70, suggesting a loss of strength in price action. On the downside, the 32,200 level stands as immediate support, and a break below this zone could open the door for further consolidation toward the 32,000 mark.

Commodity Update:  The U.S. dollar held steady after the Federal Reserve kept rates unchanged, highlighting uncertainty from rising oil prices. Fed Chair Jerome Powell said higher energy costs will likely push inflation higher. Gold fell 0.70% to USD 4,862.50, silver dropped 1.34% to USD 76.54, and copper declined 1.12% to USD 12,275.00. Meanwhile, Brent crude surged 4.52% to USD 112.26 after Iran struck key energy facilities following the South Pars attack, escalating Middle East tensions and supply risks.

Technical Update:

The S&P/TSX Composite Index edged lower on Wednesday, closing at 32,312.67, as  profit-taking cooled recent upside momentum. Despite the pullback, the broader technical outlook remains constructive, indicating a phase of healthy consolidation rather than a trend reversal. The index continues to trade above its 50-period Simple Moving Average (SMA), which is acting as a key dynamic support. Momentum indicators remain slightly weak, with the 14-period Relative Strength Index (RSI) at 38.70, suggesting a loss of strength in price action. On the downside, the 32,200 level stands as immediate support, and a break below this zone could open the door for further consolidation toward the 32,000 mark.