04:17 PM EDT, 06/04/2025 (MT Newswires) -- The Toronto Stock Exchange was down Wednesday after two record closes, as Rosenberg Research said the pace and magnitude of future gains on Canada's largest stock market "may be slower and smaller" while Bank of Canada warned the economy is "expected to be considerably weaker" in the second quarter.

Not helped by mixed commodity prices, the S&P/TSX Composite Index was down 97.64 points to 26,329.0. Among sectors, Energy and Utilities were down 1.78% and 1.00%, respectively. Base Metals, up 1.13%, and Health Care, up 0.69%, are the biggest gainers.

Rosenberg Research revisited its earlier call of outperformance on the TSX and where the trade goes from here. According to Market Strategist Marius Jongstra a "victory lap is in order" following a plus-12 percentage point outperformance of the TSX relative to the S&P 500 over the past year, and plus-5 ppts for the year to date. "A trend we first noticed and began publishing about last year."

Jonstra said while the research team is encouraged by these results, it is revisiting the outlook for this trade. He added: "The good news is that the prior trend of relative strength has the conditions in place to continue -- relative valuation support, better risk premia, looser liquidity conditions, and more attractive dividend yields are some examples. The not so good news is that markets have awoken to this trend, meaning the pace and magnitude of future gains may be slower and smaller."

In conclusion, Jongstra said while the team at Rosenberg Research still sees room for the up trend to continue, it added as more investors awaken to the extreme divergence that opened up between the two indices, pushing the TSX to new all-time highs, the pace of gains may slow down going forward.

Meanwhile, veteran economist David Rosenberg published separate research of his own on the big economic story of the day; Governor Tiff Macklem announcing the BoC decided to hold its key benchmark interest rate steady at 2.75%. In a note entitled 'Is Tiff Macklem a Deer in the Headlights?' Rosenberg said "a dovish hold" by the BoC was no surprise, but added the central bank's work is not done.

Rosenberg said the BoC had looked through the recent uptick in GDP growth to "the pull forward of exports to the United States and inventory accumulation boosted activity, with final domestic demand roughly flat." Looking ahead instead of back, Rosenberg noted the BoC added that, "The economy is expected to be considerably weaker in the second quarter, with the strength in exports and inventories reversing and final domestic demand remaining subdued."

Rosenberg said a return to Fed easing by the end of the summer will only help make the BoC's work easier, and there is no doubt in his mind that the next moves in rates will be lower. "The only issue is the magnitude, and that should help act as a gravitational downward pull across the yield curve, notwithstanding some of the impediments that are already well-known and priced in," he added.

Meanwhile, National Bank said its July cut call will be first put to the test on Friday, when the May Labour Force Survey will be released. It expects net job losses and a higher unemployment rate to push markets toward pricing a July cut, after which the May CPI report will come into focus.

Further out the horizon, National Bank noted markets have consistently priced between 25 and 50 basis points of rate relief this year but it still sees a path to more forceful easing in the second half of 2025. It highlights earlier comments from the Governor when he explained they are "prepared to act decisively if incoming information points clearly in one direction". To National Bank, the data is already starting to point in one direction; towards growing economic slack, and that trend is set to continue. It expects the overnight target will end the year at 2%, which leaves Canadian bonds attractively priced, both outright and versus U.S. treasuries.

Elsewhere, David Doyle, head of economics at Macquarie, noted Macklem emphasized that the BoC was "proceeding carefully" and would remain less forward-looking than usual. While he made clear it shouldn't be viewed as forward guidance, Macklem did indicate that members are leaning towards a potential cut ahead, although this was couched in data dependence.

In Macquarie's view, most critical to monitor ahead will be the CPI reports, the Labour Force Survey, and Q2 survey data, set for release on July 21. Looking ahead, Macquarie continues to project three rate cuts of 25 bps ahead. It suspects these may occur intermittently through year-end with the next cut likely in July.

Of commodities, gold rose mid-afternoon on Wednesday as the dollar fell after a report showed U.S. private-sector hiring plunged last month. Gold for August delivery was last seen up $21.90 to US$3,399.00 per ounce.

But West Texas Intermediate crude oil closed lower, falling for the first time in three sessions as an outsized rise in U.S. gasoline stocks offset lower supply from Canadian oil-sands projects threatened by wildfires. WTI crude oil for July delivery closed down $0.56 to settle at US$62.85 per barrel, while August Brent crude was last seen down $0.84 to US$64.79.