Traders eye Wednesday's US inflation print for clues on the Fed's next rate move
Canada's main stock index closed at a record on Tuesday even as US equities slipped for a second session and oil prices swung on fading hopes for a truce between Washington and Tehran.
The S&P/TSX composite index rose 17.59 points to 36,475.92, adding to its all-time high on gains in utilities and industrials, the Canadian Press reported.
In New York, the S&P 500 fell 0.3 percent, or 24.91 points, to 7,728.20, its second decline since setting a record on Friday, according to The Associated Press.
The Dow Jones industrial average dropped 184.13 points to 53,791.85, and the Nasdaq composite sank 159.91 points to 26,445.45.
"Markets have been buoyed by earnings. I think that there's pretty tremendous optimism in markets right now," said Kevin Burkett, portfolio manager at Burkett Asset Management.
Burkett added that equities appear to be holding up despite recent Canada-US trade tensions, saying markets have grown desensitized to such headlines.
According to the Canadian Press, economists expect Wednesday's US consumer price report to show inflation eased to 3.4 percent in July from 3.5 percent in June.
The reading could sway the US Federal Reserve, whose members remain split on whether to raise interest rates to contain price growth.
Traders are pricing a roughly even chance that the Fed lifts its main rate at its September meeting, which would mark the first increase in more than three years, as per data from CME Group cited by AP.
Such a move could put the central bank at odds with US President Donald Trump, who has lobbied for lower rates.
Not everyone expects a hike.
"Market pricing suggests a September rate hike is nearly a coin flip - but we think that overstates the case," wrote Anna Wong, chief US economist at Bloomberg Economics, pointing to weak July payrolls and tighter financial conditions.
Citi analyst Andrew Hollenhorst took a different view, telling Bloomberg the recent climb in oil prices has markets pricing rate hikes back in.
Dennis Follmer, chief investment officer at Montis Financial, told CNBC he expects the CPI report to show inflation still falling.
A continued decline would back a Federal Reserve decision to hold rates steady rather than raise them, he said, even after Friday's weak jobs report.
Oil sat at the centre of the inflation debate.
Brent crude settled 1.4 percent higher at US$88.91 a barrel on Tuesday and West Texas Intermediate closed up 1.3 percent at US$83.20, the Canadian Press reported.
Both benchmarks extended those gains on Wednesday morning, with Brent near US$89.63 and WTI at US$83.91, according to Reuters.
The moves followed renewed doubts about a US-Iran settlement.
Iran's top security official, Mohsen Rezaei, said on Tuesday the Strait of Hormuz would stay closed until Washington met Tehran's conditions, including the release of frozen assets, Reuters reported.
Shipping traffic through the waterway fell to six vessels on Monday, well below the pre-war average of 125 to 140.
Among Canadian movers, Cargojet climbed 8.59 percent after posting a $7m second-quarter profit, reversing a $3.2m loss a year earlier, as per the Canadian Press.
Cineplex fell 5.3 percent despite swinging to a profit, and RBC analyst Drew McReynolds said in a note the company fell short on adjusted earnings.
The Canadian dollar traded at 71.80 cents US, up from 71.73 cents US on Monday.
The December gold contract rose US$21.40 to US$4,441.10 an ounce.
