Canada's main stock index posted a small gain Friday, while U.S. markets were mixed following a report on wholesale inflation and the start to fourth-quarter earnings season. 

The S&P/TSX Composite Index closed up 71.82 points, or 0.34 per cent, at 20,990.22.

In New York, the Dow Jones Industrial Average was down 118.04 points at 37,592.98. The S&P 500 Index was up 3.59 points at 4,783.83, while the Nasdaq Composite was up 2.58 points at 14,972.76.

This week, investors got mixed signals from a pair of inflation reports, said Allan Small, senior investment adviser at iA Private Wealth. 

Thursday’s CPI report came in hotter than expected at 3.4 per cent. 

“Whereas the CPI number has been stubbornly high, core CPI came down, which is good,” said Small. 

A second report Friday showed that inflation at the wholesale level came in weaker than expected. 

Producer prices have shown that inflation is coming down, said Small, despite the stubbornness of CPI. 

Inflation data has been “driving the bus the last two trading sessions,” said Small. 

The U.S. Federal Reserve has signalled it expects to cut its overnight rate three times in 2024, but markets have been pricing in more cuts than that, with some calling for cuts as soon as March.

Small thinks that’s too optimistic, however. He thinks the Fed is likely to start cutting closer to mid-2024. 

“I think you need to see things get a little bit better on the inflation front.” 

The unknown of when cuts might happen or how far they will go has been causing some market volatility, he added.

Friday also saw the beginning of fourth-quarter earnings in the U.S., kicked off by the big banks. 

JPMorgan Chase reported a drop in profits in the fourth quarter, as did Bank of America, while Citigroup posted a loss for the quarter. 

Overall, bank earnings were a mixed bag, said Small.

“I guess if you have to judge it based on the first four or five stocks, predominantly banks, it's a soft start to the earning season,” he said. 

Several bank executives commented on the strength of the consumer on calls discussing their latest earnings reports. 

The banks are often seen as a bellwether for how the consumer is doing, and based on Friday’s reports the consumer continues to hold up well, said Small. 

The U.S. consumer and overall economy are “in far better shape” than Canada, he said, noting that if we get another negative quarter of GDP Canada will be in a technical recession.

“Maybe they’re slowing, but we’re slowing a lot quicker here.” 

Rate hikes are definitely off the table in Canada, said Small, but despite the weakness in the Canadian economy compared with the U.S., the Bank of Canada may not want to get ahead of the Fed with cuts.

“They might want to wait to see what the Fed does and follow right behind.” 

The Canadian dollar traded for 74.70 cents U.S. compared with 74.58 cents U.S. on Thursday.

The February crude oil contract was up 66 cents at US$72.68 per barrel and the February natural gas contract was up 22 cents at US$3.31 per mm/BTU.

The February gold contract was up US$32.40 at US$2,051.60 an ounce and the March copper contract was down four cents at US$3.74 a pound.

With files from The Associated Press

This report by The Canadian Press was first published Jan. 12, 2024.