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The TSX climbs with oil, Wall Street stalls, and inflation takes the stage

The day in one line: Canadian stocks rose about 0.9% on Tuesday as energy shares tracked oil near US$95, while US stocks barely moved as strong bank profits were offset by another drop in chip stocks. This morning, US inflation for September came in at 3.7% a year, a touch above the 3.6% expected, and the core measure also ran hotter than forecast.

What moved and why

1. Wall Street goes nowhere, slowly. The S&P 500 slipped 1.79 points, or less than 0.1%, to 7,805.45 on Tuesday. The Dow lost 180.45 points, or 0.3%, to 51,670.10. The Nasdaq fell 41.52 points, or 0.2%, to 27,204.38. The Russell 2000 of smaller companies fell 8.35 points, or 0.3%, to 2,786.13. On Monday, when the TSX was closed, the S&P 500 had dipped 0.1% and the Dow had risen 0.4%. So the S&P 500 is almost exactly where it ended last week, just shy of its record. Early this morning, S&P 500 futures were roughly flat to up 0.1%, before the inflation report landed. Prices rose 0.6% in September and 3.7% from a year earlier, up from 3.4% in August. Core prices, which leave out food and energy, rose 0.3% for the month and 2.6% for the year, both a bit above forecasts. Treasury yields rose on the news, as traders weighed the odds of another Fed rate hike.

2. Banks post strong profits, and their shares mostly fall anyway. Big US banks kicked off earnings season. Goldman Sachs earned US$17.01 a share, with stock trading revenue up 72% from a year ago. Citigroup's profit rose to US$5.2 billion, or US$2.85 a share, on revenue of US$23.8 billion. JPMorgan Chase earned US$15.3 billion, up 6%, but its US$5.57 a share was short of the US$5.90 analysts expected. Wells Fargo beat on profit but missed on revenue. Yet the shares fell: Citigroup about 5.6%, Wells Fargo 3.1%, JPMorgan 0.9% and Goldman 0.2%. Good results were already in the price after a strong run. This morning brought two more. Bank of America took a hit from the more than US$1.2 billion in penalties the US Treasury announced Tuesday, for failing to report suspicious transactions under money-laundering rules. Its profit fell 17% to US$6.9 billion, or 91 cents a share. Leaving out the penalty, it earned US$1.08 a share, just short of the US$1.10 expected, and revenue of about US$30 billion also fell short of the roughly US$30.6–30.7 billion forecast. Its shares were down about 4% before the open. Morgan Stanley did better: it earned US$3.03 a share, above the US$2.91 expected, on revenue of US$20.34 billion, up 12%. Revenue from trading stocks for clients rose nearly 41% to US$5.8 billion. Its shares were slightly higher before the open.

3. Memory chips slide for another day. Micron fell 3.6% and was the biggest drag on the S&P 500. The worry: reports that China's CXMT is making progress on a new kind of memory chip, a threat to Micron, Samsung and SK Hynix. South Korea's Kospi index fell 5.5% on Tuesday, according to AP, but bounced this morning. Europe's ASML, which makes the machines that print chips, reported record quarterly sales of €11.7 billion this morning. It raised its 2026 sales forecast to €44–45 billion.

4. Health care: good reports, cool reception. Johnson & Johnson fell about 5.7%, the worst stock in the Dow. Its sales rose 5.9% to US$25.4 billion, and it raised its full-year profit forecast to US$11.05–11.15 a share. But medical device sales grew only 2.5%, and a one-time charge to settle talc lawsuits wiped out 96% of its reported profit. UnitedHealth also beat. It earned an adjusted US$4.69 a share, well above the US$4.15 expected, and raised its 2026 forecast to at least US$20.50 a share. Its shares jumped as much as about 5% early, then gave it all back and closed down 0.2%.

5. Oil near US$95 as attacks spread. November US crude rose 40 cents to US$94.14 a barrel on Tuesday, its fifth straight gain. This morning it is about US$95.60, and Brent, the global benchmark, about US$106. Yemen's Houthi rebels struck sites in Saudi Arabia, including Saudi Aramco's headquarters in Dhahran, where a fire broke out. Iran has stepped up attacks on tankers in the Strait of Hormuz. On the other side, the US says it has helped move more than 19 million barrels of oil through the strait. Gold fell US$13.30 to US$4,177.30 on Tuesday and slid further after this morning's inflation report, to about US$4,100–4,130. Higher interest rates make gold, which pays no interest, less attractive.

6. A Fed official expects one more hike. New York Fed President John Williams told Bloomberg he still thinks one more rate increase may be appropriate this year, but none in 2027. He expects inflation to slow "quite a bit" over the next year. The Fed's next decision is October 28. The US 10-year Treasury yield eased to 5.21% from 5.24% on Friday.

Canada corner

TSX: back from Thanksgiving with a gain. The S&P/TSX Composite rose 319.36 points, or 0.9%, to 35,983.98 on Tuesday. Energy, telecom and technology stocks led, per Investing.com. Not every stock joined in: on the Toronto exchange, 554 stocks fell and 426 rose.

Who moved. Oil's climb lifted the energy patch. Canadian Natural Resources rose about 4.7% and Suncor about 3.8% (Trading Economics). The biggest gainer was Enerflex, which supplies gas-compression equipment; it jumped 14.2% to a record high after winning a contract to build more than one gigawatt of natural gas-fired power units for a large North American data centre. Gold miners lagged as gold slipped: Wesdome Gold Mines fell 9.0%, the biggest loser. Shopify rose about 3–4%. Celestica, which makes electronics for data centres, fell about 7% with the chip sell-off. Big banks gained as bond yields held steady.

A space-company stake. Trading Economics reports that CSG bought a 9.5% stake in MDA Space, making it the largest shareholder. MDA shares were little changed.

The loonie and rates. The Canadian dollar closed Tuesday at 70.31 US cents, up from 70.07 on Friday. This morning it is near C$1.421 per US dollar, but still about 2% weaker than a month ago (Trading Economics). Canada's 10-year yield is about 3.87%. The US 10-year is 5.21%. That gap of about 1.34 percentage points (my arithmetic) remains the main weight on the loonie.

Copper heads toward a record. Copper is about US$6.71 a pound, near record highs. Strikes and bad weather in Chile are disrupting mines: workers at BHP's Escondida were set to strike after wage talks failed, two unions walked out at Antofagasta's Centinela mine, and two workers died in an avalanche at Codelco's El Teniente mine. That matters for Canadian miners such as Teck and First Quantum, which sell copper at world prices.

Bank of Canada this week. Governor Tiff Macklem joins a fireside chat in Bangkok today, where the IMF and World Bank are meeting. Senior Deputy Governor Carolyn Rogers speaks there Thursday, and Macklem is on an IMF panel Friday. Times are early-morning or overnight in North America. The next rate decision is October 28.

One thing to understand: headline vs. core inflation

Today's inflation report will give two numbers, and the news will often focus on the bigger one.

Headline inflation measures prices for everything a typical household buys, including gas, heating and groceries. It's the number that matches what you feel at the pump.

Core inflation removes food and energy. Not because they don't matter, but because their prices jump around with weather, wars and harvests. Core is meant to show the slower, steadier trend underneath.

Right now the two are telling different stories. Economists expect headline inflation of about 3.6% a year in September, up from 3.4%, mostly because of oil. Core is expected at about 2.4% to 2.5%.

Why it matters: central banks such as the Fed and the Bank of Canada watch core closely. If only headline is rising, they may wait and hope the oil spike passes. If core starts climbing too, it suggests higher energy costs are spreading into other prices, such as airfares and shipping, and rate hikes become more likely.

This morning's result: headline inflation was 3.7% a year (3.6% expected) and core was 2.6% (2.4–2.5% expected). Both came in hotter than forecast. Core rising too is the warning sign: it suggests the oil shock is starting to spread into other prices, such as airfares, which AP says are up about 23% from a year ago.

On the calendar

All times Eastern (Pacific in brackets).

Today (Wednesday, October 14)

Thursday, October 15

Friday, October 16

Next week: Canada's September inflation and the Bank of Canada's Business Outlook Survey, Monday, October 19. Netflix reports October 20. Bank of Canada decision October 28; Fed decision October 28.

Sources

This newsletter is general information, not investment advice.

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