Futures linked to Canada’s primary stock benchmark edged down on Tuesday as traders weighed a modest rise in bond yields and persistent tensions in the Middle East that have lifted oil prices. The market mood was further complicated by the approach of a U.S. tariff deadline set to take effect at midnight on Tuesday unless a last-minute agreement between Ottawa and Washington is reached.
Pressure from Washington has been vocal. U.S. Trade Representative Jamieson Greer warned that any retaliatory measures from Canada would not be "tolerated," and said he expects America’s northern neighbor to show a "more conciliatory approach." Media reports indicated that Canadian Prime Minister Mark Carney is expected to speak with U.S. President Donald Trump on Tuesday. Those reports also said Carney has instructed Canadian negotiators to offer concessions to the White House in an effort to head off the new levies and reduce existing duties.
The tariff threat stems from the Trump administration’s invocation of a Depression-era statute aimed at countries accused of discriminating against U.S. products. In July, Washington indicated it could impose duties of 50% on a wide assortment of Canadian goods, naming categories such as wine, furniture, fishing rods and hockey sticks.
Against that backdrop, the S&P/TSX 60 index standard futures contract was down 5 points, or 0.2%, by 07:40 ET (11:40 GMT). The broader S&P/TSX composite index moved off a record closing high it had reached at the end of last week.
U.S. futures were broadly weaker. By 07:55 ET the S&P 500 futures contract had fallen 34 points, or 0.4%, Nasdaq 100 futures were down 343 points, or 1.1%, and Dow Jones futures were lower by 59 points, or 0.1%.
Equities on Wall Street retreated in the previous session, with the Dow Jones Industrial Average dropping 0.5%, the Nasdaq Composite dipping 0.3% and the S&P 500 falling 0.5% - its worst trading day in August to date. The pullback on the U.S. side was offset in part by gains among chipmakers, where semiconductor stocks benefited from media coverage around artificial intelligence startup Anthropic’s revenue and reports that Nvidia’s planned investment in an Ohio data center was smaller than expected.
Analysts at Deutsche Bank noted that there was no single identifiable trigger for the recent declines, writing that "There wasn’t a single catalyst for the declines, but with few signs of the U.S. and Iran coming to any sort of a deal, that meant investors priced in a more extended closure of the Strait of Hormuz." Their comment highlighted growing concern over stalled diplomacy between Washington and Tehran.
Reports indicated Iran plans to adopt a more offensive posture in the conflict as negotiations with the United States remain deadlocked. In a separate development, President Trump warned of potential military action against Oman if it interfered with U.S. efforts to reach an arrangement with Iran, a remark that added to uncertainty surrounding the Strait of Hormuz, a key artery for global oil shipments.
Brent crude futures were trading above $90 per barrel on Tuesday. Higher crude prices fed through to U.S. Treasury yields, with the 30-year yield near levels not seen in almost two decades. The rise in yields prompted concerns that firmer oil prices could stoke inflation and potentially tilt Federal Reserve thinking toward higher interest rates.
All eyes are on minutes from the Fed’s most recent meeting, scheduled for release on Wednesday. At its July 28-29 session the central bank left the policy range unchanged at 3.50% to 3.75%, though three policymakers dissented and preferred a rate increase.
Gold retreated from a recent upswing as the climb in U.S. Treasury yields raised the opportunity cost of holding the non-yielding metal.
Investors were also focused on corporate earnings, with Home Depot set to begin a string of results from major retailers. The company reported second-quarter sales and profit above expectations, driven by steady demand for home repair projects despite a weak U.S. housing market and an uncertain macroeconomic backdrop. Home Depot shares were up more than 1% in premarket trading.
A lineup that includes Walmart, Target and Lowe’s is scheduled to report this week. Those results are expected to shed additional light on U.S. consumer resilience after July retail sales and labor data both came in softer than anticipated.
Market context
Between the tariff impasse, heightened geopolitical risk in the Middle East and a pickup in Treasury yields, investors faced cross-currents that touched energy, financials, commodities and consumer-facing sectors. The combination of trade friction and higher commodity prices has the potential to influence inflation expectations and central bank deliberations, while retail earnings will offer near-term indicators of consumer demand.