04:16 PM EST, 02/18/2025 (MT Newswires) -- The Toronto Stock Exchange was higher Tuesday, buoyed by hope the Bank of Canada will look past an uptick in inflation last month and cut interest rates again in March and by higher commodity prices.

The S&P/TSX Composite Index closed up 165.61 points to 25,648.84. Among sectors, Energy, up 1.14%, and Industrials, up 0.83%, were the biggest gainers. Telecoms and Utilities, down 0.88% and 0.2% respectively, the biggest decliners.

Statistics Canada on Tuesday reported Canadian headline consumer price index inflation increased in January to 1.9% year-on-year, slightly above expectations for a 1.8% year-over-year print and more than the 1.8% year-over-year reading from December

After looking at today's Canadian inflation, David Doyle, head of economics at Macquarie, noted market pricing expectations for a March BoC cut had retrenched to near 35% in recent weeks. But, overall, in the first half of 2025 Macquarie suspects inflation data to be subdued in Canada given the size of the output gap and disinflationary impacts from a shift in immigration policy. Macquarie continues to believe the BoC is "likely to proceed with one" rate cut next month. It added the decision could be impacted by both the upcoming employment data and any U.S. trade policy developments

Meanwhile, National Bank noted if you remove the impact of the GST holiday on several products you can see that annual inflation is now at 2.6%, or 0.7% above the 1.9% officially released this morning. Perhaps, it said, the recent pickup in inflation would have convinced the BoC that a pause in monetary easing was appropriate. "However," it added, "the situation is far from normal. The threat of tariffs should weigh on the Canadian economy, keeping investment projects on hold. In this context, we continue to forecast a 25-basis-point cut in March, although many economic data and political developments could change our outlook between now and then."

In a separate note, National Bank said with lower interest rates, dividend-paying stocks could come back in favor. For those seeking "stable and elevated income," the bank cited a portfolio containing its best ideas for the first half of 2025.

National Bank analysts collectively cover about 308 TSX-listed equities, of which more than half offer dividends or distributions. The bank said it maintains a portfolio that currently contains 21 of its favorite yield ideas, across a broad range of industries and include large and small cap stocks. It added the companies in the portfolio share three investment criteria: a dividend, distribution yield of approximately 5% or greater; a good chance for growth in the payout, with a low risk of a cut; a positive bias regarding the prospects of the company and/or share price.

In a portfolio update, National Bank said the purpose of the Dividend All-Stars portfolio is to provide income seeking investors with high quality companies for which NBF Analysts hold a positive view. For the updated portfolio for 2025, it added, the average 5.6% yield is "attractive" despite high interest rates (10-year Canada yield at near 3.1%, consistent with its last review in mid-August 2024). Four of the companies in the portfolio increased dividends since the last publication (August 2024) including AltaGas ( ATGFF ) , Brookfield Renewable Partners (BEP-UN.TO), Canadian Imperial Bank of Commerce ( CM ) and Chemtrade Logistics (CHE-UN.TO).

National Bank noted dividend increases have continued to significantly outpace reductions; including the second half of 2024, there have been 165 dividend increases versus 12 reductions since the initial 2012 publication. Although the portfolio's overall performance lagged the S&P/TSX Composite in second half 2024, National Bank said the cumulative total appreciation of the NBF's Dividend All-Stars since inception is now 377% versus the S&P/TSX at 327%.

Of commodities today, West Texas Intermediate crude oil closed higher as a Ukrainian drone attack on an export pipeline in Russia damaged a pumping station and cut shipments on the 1.3-millon barrel per day line, while a report said OPEC+ is again considering a delay for the return of voluntary production cuts to market. WTI crude oil for March delivery closed up $1.11 to settle at US$71.85 per barrel, while April Brent crude was last seen up $0.53 to US$75.75.

Gold traded at a record high late afternoon on Tuesday even as the dollar advanced as safe-haven demand rises amid turmoil over U.S. trade policy. Gold for April delivery was last seen up $50.00 to US$2,950.70 per ounce, topping the previous record close set Thursday of $2,945.40.