Canada's main stock index closed at its highest level in six sessions on Tuesday, as a strong earnings report from electronics manufacturer Celestica and a rally in gold prices helped offset weakness in energy stocks. The S&P/TSX Composite Index rose 0.6% to 36,171.49, according to Reuters.
The gains came a day before two major central bank decisions that could set the tone for markets in the coming months. Both the U.S. Federal Reserve and the Bank of Canada are scheduled to announce their latest interest rate moves on Wednesday.
Celestica leads tech higher
Celestica, a Toronto-based company that makes electronics for data centers and other industries, jumped 11.9% after reporting quarterly results that beat analysts' expectations. The stock's surge helped the technology sector edge up 0.7%.
Investors have been paying close attention to companies like Celestica because of their exposure to the "AI trade" — the wave of spending on artificial intelligence infrastructure that has driven much of the recent rally in U.S. tech stocks. Celestica's earnings beat suggests that demand for its products remains strong, which could be a positive sign for the broader tech sector.
However, tech is not the biggest driver of the TSX. That role belongs to financials and materials, which together make up a large portion of the index. Financials added 0.7% on Tuesday, but the real action was in mining.
Gold and miners shine
The materials sector climbed 3.3% as gold prices rose 1.1%. Mining companies often see their profits move more sharply than the underlying metal price, so a modest gain in gold can translate into a much bigger jump in mining stocks.
Gold is often seen as a safe-haven asset, and its price tends to move with "real yields" — the return investors get on government bonds after accounting for inflation. If central banks signal they are willing to keep interest rates high, real yields can rise, which usually pressures gold. If they sound more dovish, or open to cutting rates, gold can benefit.
That dynamic is why traders are watching Wednesday's central bank meetings so closely. The Fed is widely expected to hold rates steady, but its statement and press conference could hint at future moves. The Bank of Canada, meanwhile, has been wrestling with inflation that has been slower to cool than in the U.S.
For Canadian investors, the direction of gold and other commodities can have an outsized impact on the TSX. When materials rally, they can lift the whole index; when they fall, they can drag it down even if other sectors are steady.
Energy pulls the other way
Not all commodity-linked stocks moved higher on Tuesday. Energy stocks fell 2.6% after U.S. crude oil settled 1.8% lower at $99.90 a barrel. That drop shows how quickly different parts of the commodity complex can move in opposite directions, and how that can create mixed signals for the broader market.
Oil prices have been volatile in recent months, influenced by global supply concerns, demand expectations, and the strength of the U.S. dollar. A weaker oil price is generally negative for Canadian energy producers, which are a major component of the TSX.
What it means for investors
For everyday investors, the key takeaway is that the TSX is heavily influenced by commodity prices and interest rate expectations. Wednesday's central bank decisions could trigger sharp moves in both gold and oil, which would likely ripple through the index.
If the Fed sounds more hawkish than expected — meaning it is more willing to keep rates high — real yields could rise, pressuring gold and mining stocks. That could turn Tuesday's materials rally into a drag on the TSX. Conversely, a dovish tone could extend the gains.
The Bank of Canada's decision is also crucial for Canadian households, especially those with variable-rate mortgages. As we've noted before, the shock of higher rates could stretch into 2027 for many borrowers. A rate cut would provide some relief, but the central bank has been cautious about easing too quickly.
Traders are also watching the currency markets. The Canadian dollar, or loonie, has been under pressure recently as oil prices dipped and as investors braced for the Bank of Canada's decision. A weaker loonie can help exporters but can also push up the cost of imported goods, adding to inflation pressures.
For those with a diversified portfolio, the takeaway is that the TSX's performance often hinges on a few key sectors. Keeping an eye on commodity prices and central bank signals can help you understand why the index moves the way it does.
As always, it's important to remember that markets can be unpredictable. While Tuesday's gains were encouraging, the real test comes Wednesday when the Fed and the Bank of Canada reveal their next steps.
