Index Update:

Canadian equities posted modest gains on Thursday, partially rebounding from losses over the prior two sessions, as investors balanced optimism over U.S.-Iran negotiations with renewed geopolitical tensions following a cargo ship attack in the Strait of Hormuz. At the same time, subdued U.S. inflation data helped alleviate concerns over additional Federal Reserve rate hikes.

After opening above yesterday's close, today the benchmark S&P/TSX Composite Index traded firmly positive throughout the session before settling at 34,850.21, up by 114.12 points (or 0.33%).

Macro Update:

Canada's 10-year government bond yield dropped below 3.40%, reaching its lowest level in more than three months. Softer core inflation strengthened expectations that the Bank of Canada will keep interest rates unchanged despite the Federal Reserve's more hawkish outlook.

The US dollar traded near a one-year high as investors continued to price in possible Federal Reserve rate hikes. Despite easing geopolitical tensions and lower oil prices, expectations of persistent inflation have kept the dollar well supported.

Markets expect US PCE inflation to accelerate in May, reflecting higher energy costs despite easing geopolitical tensions. A stronger inflation reading could reinforce the Federal Reserve's hawkish stance and support expectations for additional interest rate hikes later this year.

Top Movers:

The easing inflation concerns and supporting financial stocks and the broader index. TD Bank rose 0.9%, RBC gained 0.4%, and BMO added 0.9%. Gold prices also edged higher, supporting mining shares, with Agnico Eagle rising 1.7%. Meanwhile, a renewed wave of volatility in technology stocks on Wall Street weighed on Canadian tech shares. Shopify fell 2.6%, Constellation Software lost 3.6%, and Celestica shed 0.7%.

Our Stance:

The immediate support is positioned near the 34,700 level. As long as the index holds above this zone, the current positive technical structure is likely to remain intact, supporting the potential for renewed buying interest. A successful defence of support could encourage the index to resume its upward trajectory and challenge higher resistance levels in the sessions ahead. However, a decisive break below 34,700 could weaken near-term momentum, increase selling pressure, and raise the likelihood of a deeper corrective pullback.

Commodity Update:

The U.S. dollar slipped on Friday and was on track to end its six-session winning streak after the latest U.S. inflation data came in line with market expectations, reducing concerns over additional interest rate hikes by the Federal Reserve. Gold declined by 1.00% to USD 4,007.70, silver fell 3.72% to USD 56.20, and copper dropped 1.13% to USD 13,150.00. Brent crude oil eased 0.50% to USD 74.89 per barrel as improving shipping through the Strait of Hormuz and optimism over a potential U.S.-Iran peace agreement weighed on prices despite renewed security concerns near Oman.

Technical Update:

The S&P/TSX Composite Index gained 114.21 points, or 0.33%, on Thursday to close at 34,850.21. From a technical perspective, the broader outlook remains constructive, with the index continuing to trade comfortably above its 21-day Simple Moving Average (SMA), which is acting as an important dynamic support level and reinforcing the prevailing bullish trend. Momentum indicators also remain supportive, with the 14-day Relative Strength Index (RSI) hovering around 52.79, indicating balanced market conditions. This suggests that underlying buying interest remains intact while leaving room for further upside before the index approaches overbought territory. Immediate support is positioned near the 34,700 level. As long as the index holds above this zone, the current positive technical structure is likely to remain intact, supporting the potential for renewed buying interest. A successful defence of support could encourage the index to resume its upward trajectory and challenge higher resistance levels in the sessions ahead. However, a decisive break below 34,700 could weaken near-term momentum, increase selling pressure, and raise the likelihood of a deeper corrective pullback.