TSX Gains as Tech Earnings Loom, Iran Tensions in Focus

Canada's main stock index, the S&P/TSX Composite Index, closed higher on Wednesday, driven by investor anticipation of key earnings reports from the technology sector. The index settled at 35,616 points, gaining 0.70% from the previous session's close and approaching record highs. This uptick followed a robust 1.2% surge on Tuesday, which brought the index to 35,369.08 and snapped a three-session losing streak.

Markets are particularly focused on the upcoming second-quarter earnings from artificial intelligence (AI)-backed chipmakers. Figures from companies like Texas Instruments (TXN) are expected to offer insights into the health of the chips underpinning AI models. According to LSEG research, earnings for chip and chip gear makers within the S&P 500 are projected to jump by 133% year-over-year in the second quarter. This cohort alone is estimated to contribute approximately 44% of the overall S&P 500 company earnings gains. Additionally, earnings from U.S. tech giants such as Alphabet (GOOGL) and Tesla (TSLA) are also on investors' radar.

Another significant factor influencing markets has been the geopolitical tensions in the Middle East. The U.S. completed an eleventh consecutive night of strikes on Iran, met by Iranian retaliations, intensifying concerns about a widening conflict in the region. This situation has triggered fears of supply disruptions in the Strait of Hormuz, a vital waterway through which roughly a fifth of the world's oil and natural gas is shipped. The global crude benchmark, Brent, has climbed above $95 a barrel in recent days.

Geopolitical risks have also bolstered demand for safe-haven assets. Gold prices touched a two-week high, rising above $4,117 per ounce. Furthermore, U.S. President Donald Trump's threat to impose new 50% tariffs on a broad range of Canadian imports, including paper, plywood, and hockey sticks, remains a key concern. While Canadian Prime Minister Carney stated that he and Trump agreed to intensify trade discussions, Carney also indicated a willingness to consider any option should the White House proceed with the levies.

Canadian economic data is also drawing market attention. The annual inflation rate eased to 2.8% in June from 3.2% in the prior month, largely due to a dip in gasoline prices. This development has strengthened expectations that the Bank of Canada will hold interest rates unchanged for the remainder of the year. Analysts and market participants will continue to closely monitor diplomatic efforts in the Middle East and the performance of technology companies. The probability of a deal with Iran and the U.S. Federal Reserve's messaging on interest rates will play a critical role in shaping market direction in the coming period.