04:30 PM EDT, 05/14/2024 (MT Newswires) -- The Toronto Stock Exchange edged down on Tuesday over doubts on the timing of rate cuts from the Bank of Canada after a US inflation measure rose more than expected last month, while the as the return of meme stocks pushed up Blackberry (BB.TO) shares and copper prices rose to the highest in more than two years.

The S&P/TSX Composite Index closed down 15.83 points to 22,243.34. The biggest gainer was base metals, up 3.0% after the price of copper rose to the highest since March, 2022, followed by Health Care, up +1.39% on strength of cannabis issues, while energy was the biggest loser on the day, down 0.9%, as oil fell to a two-month low.

Anxiety over Bank of Canada policy on rate cuts looks to have made the market jittery Tuesday, after the US Bureau of Labor Statistics on Tuesday reported the producer price index rose by 0.5% in April from March, up from a revised rise of 0.2% in March and ahead of the consensus estimate for a 0.3% monthly rise, according to Marketwatch, likely pushing out interest-rate cuts from the Federal Reserve.

There are some concerns in the market the Bank of Canada won't start its rate cutting cycle on June 5, and then there are others that fear what impact a divergence in policy between Canada and the United States will have on the economy here, or even more specifically on the Canadian dollar.

However RBC on Tuesday pointed out the Bank of Canada has diverged from US rates significantly in the past.

"A short history lesson provides the starting point for assessing if the BoC can stray from the Fed (start earlier and do a substantial round of cuts before the Fed)," the bank noted. "In many cases - cuts in 2015 (Fed on hold), hikes in 2010 (Fed on hold), hikes/cuts in 2003 (Fed cut near to the first BoC hike and then on hold), and 225bp more of BoC vs Fed cuts in 1995 - the BoC has done what was justified by the domestic data. Importantly, the only episodes over the past 30 years where policy cycles were very aligned was during "common shocks" - 2001 tech bubble, 2005-2007 commodity boom, 2008 GFC, and into/out of the COVID period. So absent an unforeseen, the BoC should be able to forge its own path."

National Bank, in its Monthly Economic Monitor for May 2024, has warned that given the 6-8 quarter lag in the transmission of monetary policy to the economy, the risk of interest rates inflicting too much damage on the economy remains high. This overly restrictive policy is reflected in its economic outlook for the coming months.

With the slight contractions National Bank anticipates in Q2 and Q3, this should limit growth to 0.7% in 2024, with a slight acceleration to 1.2% expected the following year. This would translate into an unemployment rate of around 7.0% at the end of the year, it added.

The return of meme-stock trading helped push the shares of Blackberry by 11% to C$4.73, the highest since Jan.22, in heavy trading. Gamestop (GME), the original meme stock, has more than doubled over the past two sessions.

West Texas Intermediate (WTI) crude oil closed at a two-month low on Tuesday following the PPI data, while OPEC reiterated its optimistic 2024 demand forecast. WTI crude for June delivery closed down US$1.10 to settle at US$78.02 per barrel, the lowest since March 12. July Brent crude, the global benchmark, closed down US$0.98 to US$82.38.

Gold traded higher mid-afternoon on Tuesday as the dollar and treasury yields weakened. Gold for June delivery was last seen up US$19.20 to US$2,362.20 per ounce.