Strength in base metals and battery metals stocks helped Canada's main stock index eke out a small gain Tuesday, while U.S. stock markets were mixed on the heels of a report on retail sales.

In Canada, the latest data on inflation showed more of a slowdown than analysts expected as headline inflation dipped to 3.8 per cent in September. Meanwhile in the U.S., fresh retail sales data came in stronger than anticipated.

The S&P/TSX Composite Index closed up 72.00 points, or 0.37 per cent, at 19,692.80.

In New York, the Dow Jones Industrial Average was up 13.11 points at 33,997.65. The S&P 500 Index was down 0.43 points at 4,373.20, while the Nasdaq Composite was down 34.24 points at 13,533.75.

Markets on both sides of the border on Tuesday reflected uncertainty about the future when it comes to interest rates, earnings and consumer health, said Adelaide Chiu, portfolio manager, vice-president and head of responsible investing at NEI Investments. 

While the U.S. banks recently kicked off the third-quarter earnings season with stronger-than-expected headline numbers, they belied signs of consumers beginning to pull back or falter, especially in lower income brackets, said Chiu.

“I think there’s still a bit of uncertainty as to what is to happen in the future with respect to rates, how that's going to impact consumer spend, consumer sentiment,” she said.

Markets are still grappling with how long to expect elevated interest rates, she said.

The Bank of Canada and the U.S. Federal Reserve are widely expected to be near the end of their tightening cycles, and to keep rates where they are at their next meetings.

Inflation continues to stabilize but is still too high, and the central banks are walking a thin line, said Chiu. She sees rates remaining higher for longer, and notes the lagged effect of higher rates is increasingly taking a toll on the consumer, but pointed out that analysts have been surprised many times since the banks started raising rates.

“I think there was anticipation this time last year that rates would not continue to rise, and they have,” said Chiu. 

“I think it’s too early to say what the Fed’s next move will be. But the market is anticipating a hold … in the current period.” 

As the U.S. earnings season continues, Chiu said she’s eyeing what companies have to say about their outlooks for the fourth quarter and beyond. Earnings forecasts for the S&P 500 in 2024 are still in low double digits, she said.

But “there may be some caution warranted there, if earnings are revised downward,” she said.

The Canadian dollar traded for 73.28 cents U.S. compared with 73.43 cents U.S. on Monday.

The December crude oil contract was up 18 cents at US$85.44 per barrel and the November natural gas contract was down three cents at US$3.08 per mm/BTU.

The December gold contract was up US$1.40 at US$1,935.70 an ounce and the December copper contract was down less than a penny at US$3.58 a pound.

— With files from The Associated Press

This report by The Canadian Press was first published Oct. 17, 2023.