The S&P/TSX Composite Index closed sharply lower on Tuesday as weakness in base metals and energy stocks outweighed gains in technology and financials, while investors assessed escalating Canada-US trade tensions and higher crude oil prices.
The index closed down 390.75 points, or 1.1%, to 36,123.05. Information Technology led decliners, down 3.1%, followed by Financial and Industrials that closed down 1.5% and 1.1%, respectively. Base Metals and energy were up 3.5% and 0.9%, respectively.
In commodities, West Texas Intermediate (WTI) and Brent crude rose on Tuesday as attacks by Iran-backed Houthi rebels on Saudi energy facilities heightened concerns that the Middle East conflict could further disrupt regional oil supplies. October WTI crude oil contract settled up $1.55, or 1.7%, at $93.03 per barrel, while November Brent oil was last seen up $1.81, or 1.9%, at $98.81 per barrel.
Meanwhile, December Comex gold futures was down 1.6%, or $70.30, to $4,406.30 per ounce at last look.
In currencies, the US dollar edged down 0.2% against the Canadian dollar, with USD/CAD at 1.3782 at last look.
The Canadian dollar is expected to resume its upward trend in 2027, assuming Canada-US trade talks ultimately lead to a favorable outcome, according to National Bank Capital Markets. The pair is expected to reach $1.37 in Q4 2026, $1.35 in Q1 2027 and $1.33 in Q2 2027, respectively.
Canadian Prime Minister Mark Carney defended retaliatory tariffs that came into effect Tuesday as necessary to protect Canadian workers, businesses and communities from what he called unfair US trade measures. He said reducing Canada's reliance on the US will come at a cost but is necessary to strengthen the economy and diversify its trade relationships.
Carney's approval rating has risen as more Canadians back a tougher stance in the escalating trade dispute with the United States, according to an Angus Reid Institute poll published on Tuesday. Carney's approval rose 11 percentage points to 62%, near his previous high.
Despite continued trade tensions with the US, Canada's gross domestic product is expected to grow 1.4% in 2027, up from a projected 0.9% this year, according to National Bank.
In corporate news, Tamarack Valley Energy (TVE.TO) on Tuesday said it agreed to acquire Headwater Exploration (HWX.TO) in an all-stock transaction valued at a combined CA$10 billion, creating a larger oil producer focused on the Clearwater heavy-oil region in Alberta.
In stocks, Bombardier (BBD-B.TO) shares closed down C$7.99, or 2.5%, after US President Trump threatened a boycott of the company's planes. In response, Bombardier highlighted its extensive US operations, jobs and supply chain ties in a statement that did not mention Trump.