The S&P/TSX Composite caught its breath near record territory on Thursday as Bay Street waited for the next big data point out of Washington. The index has surged on the back of firm commodity prices and deal buzz in mining, and it closed at a new high on Wednesday. Traders now want confirmation that U.S. inflation is still easing before they take it any higher.
The temperature check arrives at 8:30 a.m. Eastern, when the Bureau of Labor Statistics publishes August consumer price figures.
Markets will parse the headline and core readings for signs that pricing pressures are cooling enough to keep the Federal Reserve on track to cut rates at its meeting next week. The timing is locked in, and investors have circled it on their calendars.
Wednesday’s advance to a record close was powered by the same forces that have driven the TSX all year. Materials and energy climbed alongside copper, gold, and crude, reinforcing the index’s commodity tilt.
Gold hovered near an all-time high after a softer run of U.S. data bolstered wagers on Fed easing, a backdrop that typically supports non-yielding assets.
The metal’s momentum has fed through to Canada’s heavyweight miners, helping the benchmark shrug off pockets of weakness elsewhere.
Futures steadied after recent gains amid a mix of geopolitical headlines and expectations that supply growth will stay measured into year-end. For the TSX, even modest firmness in crude can matter, given the weight of producers in the index and the cash flow sensitivity of balance sheets after a year of capital discipline.
A proposed megamerger between Anglo American and Teck Resources, announced this week, sharpened focus on the sector and reminded investors how quickly the calculus can change for Canada’s miners if consolidation accelerates.
That prospect, combined with high spot prices for precious metals, helps explain why the market’s pullbacks have been shallow when they come at all.
The near-term question is whether the U.S. inflation print extends the run or forces a pause. A cooler-than-expected reading would validate the rally’s latest leg, reinforcing a benign path for real rates and potentially loosening financial conditions.
A hotter report would test the TSX’s leadership in resources and defensives by reviving doubts about the timing or size of Fed cuts.
Either way, the reaction will likely show up first in rate-sensitive pockets of the Canadian market, including banks and utilities, before rippling into cyclicals.
Domestic policy sits just behind the U.S. data in the market’s line of sight. The Bank of Canada’s next rate decision is scheduled for September 17.
Futures pricing implies another easing step is on the table after a summer of lacklustre growth and softer job creation.
If the Fed signals it is ready to move as well, the cross-border policy alignment could add a final push to Canadian risk assets into quarter-end.
Momentum is strong and breadth has improved, helped by miners, pipelines, and staples. At the same time, the path from here still runs through inflation and policy.
A benign CPI would keep the soft-landing story intact and could open the door to incremental gains. A surprise would not erase the fundamental support from gold and energy, but it would likely extend the market’s stalling pattern until the policy dust settles.
