Canada's S&P/TSX Composite Index shook off an early decline to trade higher by mid-morning Thursday, as gains in healthcare and telecom stocks outweighed another pullback in copper and other base metals.
The turnaround was led by a 3% jump in healthcare shares and a 2.9% advance in telecoms, according to the data. Those gains helped lift the broader index even as the base-metals group fell 2.2% and copper dropped 1.9%.
Why copper is under pressure
The drag on metals comes from the latest US inflation report. September's producer price index rose 6.3% from a year earlier and 1.3% from the prior month, according to the Bureau of Labor Statistics. That's a hot reading that can make investors worry interest rates will stay higher for longer.
Higher rates tend to cool borrowing and spending, which can soften demand for industrial commodities like copper. Copper is often seen as a barometer for global economic health because it's used in everything from construction to electronics. When investors expect slower growth, they tend to sell copper and other cyclical materials.
This isn't the first time copper has stumbled on inflation worries. As we noted in our earlier coverage of copper's pullback on inflation data, the metal has been sensitive to shifts in rate expectations. The latest move suggests that sensitivity hasn't faded.
Healthcare and telecoms: the safe havens
While metals struggled, investors rotated into sectors that are typically seen as more defensive. Healthcare and telecom companies tend to have steadier earnings and are less tied to the economic cycle. That makes them attractive when growth worries rise.
The telecom rally also comes amid broader interest in the sector. As we've seen with Jio's IPO resetting telecom valuations, investors are paying attention to how telecom companies are priced. In Canada, the major telecoms are known for their reliable dividends, which can be appealing when bond yields are volatile.
Healthcare stocks, meanwhile, have been a mixed bag this year, but Thursday's jump shows they can still lead on days when the market is looking for stability.
What it means for investors
For everyday investors, the key takeaway is that the TSX's move higher doesn't mean everything is rallying. The index is a collection of very different sectors, and on any given day, some can be up sharply while others are down.
Thursday's action shows a classic rotation: out of cyclical, rate-sensitive areas like metals and into defensive sectors like healthcare and telecoms. That's a sign that investors are cautious about the economic outlook, even as the overall index looks green.
If you hold a diversified portfolio, you're likely to see this kind of divergence play out. It's a reminder that broad market moves can mask what's happening underneath. For those with exposure to copper or base metals, the inflation data is worth watching—if rates stay high, those sectors could face continued pressure.
On the other hand, the resilience of healthcare and telecoms suggests there's still demand for income and stability. As we've noted in our analysis of hot inflation hitting AI stocks, rate fears are rippling through markets globally. Canada is no exception.
What to watch next
Investors will be watching for further inflation data and any signals from the US Federal Reserve about the path of interest rates. If inflation stays hot, the case for higher-for-longer rates strengthens, which could keep pressure on commodities and other cyclical assets.
At the same time, earnings season is underway, and company results will offer clues about how businesses are coping with higher borrowing costs. For Canadian investors, the performance of the big banks and energy companies will be particularly important, given their weight in the index.
For now, the TSX's rebound is a reminder that markets can turn on a dime. But the narrowness of Thursday's gains suggests that the underlying mood is still cautious. As always, a diversified approach remains a sensible way to navigate these crosscurrents.
