TSX Pulls Back from Record High as Investors Await Key Economic Data

Canada’s main stock index edged lower on Tuesday, retreating from its record high in the previous session, as investors grew cautious ahead of crucial economic data expected later this week — data that could shape the Bank of Canada’s next move on interest rates.

The S&P/TSX Composite Index slipped 0.2% to 28,500.48, with the pullback coming after markets reopened following a long weekend. The downturn followed the release of weaker-than-expected second-quarter GDP data, which showed a sharp decline in exports and broader economic contraction.

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In response to the disappointing GDP figures, money markets slightly increased the probability of a rate cut at the Bank of Canada’s upcoming September 17 meeting — now pricing in a 50.5% chance, up from 48% previously. The central bank has held its policy rate steady at 2.75% since March.

“The Bank of Canada can easily cut 25 to 50 basis points in the upcoming meetings to stimulate this economy, which is basically right now non-existent,” said Allan Small, senior investment advisor at Allan Small Financial Group with iA Private Wealth. He cited declining business activity, soft export numbers, and an earlier negative jobs report as key concerns.

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All eyes are now on Canada’s employment data due Friday. A weak jobs print could all but guarantee a rate cut this month, analysts say. The U.S. nonfarm payrolls report, also set for release Friday, is another major focal point, as it will offer further insight into labor market trends influencing Federal Reserve policy.

On the TSX, technology stocks dropped 1%, mirroring losses in U.S. tech shares, while rate-sensitive real estate stocks declined 1.3%.

Meanwhile, bond yields moved higher amid renewed fiscal concerns. Canadian 10-year government bond yields rose 6.4 basis points to 3.439%, while the U.S. 10-year Treasury yield climbed to 4.265%, adding pressure to equity markets.

Investor sentiment was also influenced by a U.S. appeals court ruling on Friday, which found that most of former President Donald Trump’s tariffs were illegally imposed — a decision that could have broader trade implications.