TORONTO — Canada's main stock index gained more than 140 points to finish trading Tuesday on strength in the real estate and financials sectors, while U.S. stock markets reached new highs amid better-than-expected U.S. inflation data.
The S&P/TSX composite index was up 146.03 points at 27,921.26.
“It's been a very positive day for risk assets across the board when you're looking at equities,” said Macan Nia, the co-chief investment strategist at Manulife Investment Management.
He said gains were seen across Europe and on the TSX.
“But the driver has been the S&P 500 and Nasdaq, that the risk-on rally has continued into the U.S. as we got those better-than-expected inflation numbers that investors were very closely watching to see whether it gives any clues to us in terms of what the Fed may or may not do after the next meeting in September.”
In New York, the Dow Jones industrial average was up 483.52 points at 44,458.61. The S&P 500 index was up 72.31 points at 6,445.76, while the Nasdaq composite was up 296.50 points at 21,681.90. The S&P 500 rose 1.1 per cent to top its all-time high set two weeks ago, and the Nasdaq composite jumped 1.4 per cent to set its own record.
Stocks got a lift from hopes that the better-than-expected inflation report will give the U.S. Federal Reserve leeway to cut interest rates at its next meeting in September.
Lower U.S. rates would give a boost to investment prices and the nation’s economy by making it cheaper for U.S. households and businesses to borrow to buy houses, cars or equipment.
U.S. President Donald Trump has angrily been calling for cuts to help the economy, often insulting the Fed’s chair personally while doing so. But the Fed has been hesitant to move because of the possibility that Trump’s tariffs could make inflation much worse.
“This narrative that tariffs would at some point impact prices in the U.S. has been top of mind for investors really all year,” Nia said.
“We're in August, the trade uncertainty started in March, so investors were expecting maybe we might start seeing the trickle-down effect of tariffs.”
He added that the recent U.S. inflation numbers have increased the odds of the Federal Reserve lowering borrowing costs multiple times this year.
“So the markets are cheering the potential of lower interest rates for a U.S. economy without thinking on the other side of, ‘why are interest rates being cut in terms of the recession dynamic of that,’” he said, adding that the probability of a recession in the U.S. over the next six months remains low.
Going forward, Nia added that investors might want to exercise some caution.
“I think in the short term, we're vulnerable. Markets are priced for perfection. Valuations are elevated. We've gone through earnings season unscathed,” he said.
Nia also noted that September is a historically weak month for markets.
“Near term, I think some cautiousness would be prudent for investors, but remaining constructive on the long-term outlook,” he said.
On the trade front, Nia said he doesn’t think recent tariffs placed on Canada by China will weigh on Canada’s benchmark index.
China announced a 75.8 per cent preliminary tariff on Canadian canola on Tuesday, following an anti-dumping investigation launched last year in response to Canada's tax on Chinese electric vehicles.
“When you look at the drivers of the TSX in terms of the contribution, it's coming from financials, it's roughly a third of the return. A third of it has been the materials, so gold. And then Shopify, to the surprise of no one, has also contributed a couple per cent,” he said.
“So it hasn't really been any agriculture or anything of that nature. So I don't think that's going to be a driving factor for the TSX moving forward.”
The Canadian dollar traded for 72.60 cents US compared with 72.54 cents US on Monday. The September crude oil contract was down 79 cents US at US$63.17 per barrel.
The December gold contract was down US$5.70 at US$3,399 an ounce.
— With files from The Associated Press.
This report by The Canadian Press was first published Aug. 12, 2025.
Companies in this story: (TSX:GSPTSE, TSX:CADUSD)
Daniel Johnson, The Canadian Press
