Everything You Need to Know on Tuesday: Shopify Climbs to Prominence in TSX Composite Index

Good morning mooers! Here are things you need to know about today's market:

● S&P/TSX 60 Index Standard Futures are trading at 1,492.40, down 0.45% from previous close

● Canada CPI tad higher than expected in October on smaller drop in gasoline prices

● Shopify climbs to prominence in TSX Composite Index

● Gold rebounds from a two-month low as the dollar weakens

Today, the Canadian dollar is trading at 71.12 US cents, a decrease from the previous close.

Canada CPI Tad Higher Than Expected in October on Smaller Drop in Gasoline Prices
In October, Canada's consumer price index (CPI) increased by 2.0% year-over-year, up from 1.6% in September, largely due to a less steep decline in gasoline prices, as reported by the national statistical agency on Tuesday. This was slightly above the 1.9% forecast by MUFG.

Excluding gasoline, the CPI rose by 2.2% year-over-year, consistent with the growth rates from August and September, according to Statistics Canada.

Goods prices slightly increased by 0.1% after a 1.0% drop in September, while service prices grew by 3.6% in October, the smallest annual increase since January 2022. Over the past three years, goods and services prices have risen by 10.2% and 14.2%, respectively.

Monthly, the non-seasonally adjusted CPI rose by 0.4% in October, reversing a decline of 0.4% in September. Seasonally adjusted, it increased by 0.3%.

Year-over-year, October saw a 4.0% decline in gasoline prices, less than September's 10.7% drop, partly due to a base-year effect and a 6.4% monthly decrease due to lower refining margins and reduced global oil demand.

Shelter costs rose by 4.8% year-over-year in October, slightly below the 5.0% rise in September. Food prices from stores accelerated to a 2.7% increase, with notable rises in prices for fresh vegetables and preserved fruits.

Statistics Canada's CPI reports measure consumer price levels for a broad basket of goods and services, with the core CPI excluding volatile items like food and energy to provide a gauge of underlying inflation pressures.

Gold prices rose on Tuesday morning, rebounding from six losing sessions as the dollar and treasury yields weakened.

Gold for December delivery was last seen US$2,642.0 per ounce, rising off Friday's two-month low.

The rise comes even as the dollar weakened, a bullish note for commodities priced in the currency. The ICE dollar index was last seen down 0.43 points to 106.26.

Also aiding the gain was a forecast from Goldman Sachs predicting gold would reach US$3,000 per ounce next year, Bloomberg News reported.

Treasury yields fell, with the U.S. two-year note last seen paying 4.297%, down 3.4 basis points, while the yield on the 10-year note was down 2.5 points to 4.419%.

Investors utilizing market-weighted exchange traded funds (ETFs) and Canadian equity mutual funds for exposure to Canadian equities might be surprised to learn that Shopify Inc. has risen to a prominent position within the benchmark S&P/TSX Composite Index.

Shopify, an e-commerce giant, has climbed to become the second largest company on Canada's primary stock exchange, boasting a market capitalization of nearly $2 billion. It now represents 5.4 percent of the index, trailing only behind Royal Bank of Canada, which holds a 6.9 percent share. TD Bank, which has faced recent scandals, ranks third at 3.9 percent.

Over the past six months, Shopify's stock value has doubled due to strong earnings and a positive sales forecast for the holiday season. This surge has significantly contributed to the overall 12 percent gain of the index, which is traditionally dominated by major banks, telecom companies, and natural resource firms. In market-weighted ETFs, holdings like Shopify are adjusted daily based on their market cap, automatically increasing their representation as share prices rise.

While diversification within a typically undiversified index is beneficial, Shopify's dominance introduces a risk of over-reliance on a single company, which could affect the stability and income that millions of investors depend on. Historically, companies like Nortel, Research in Motion (now Blackberry), and Valiant Pharmaceuticals have similarly dominated the TSX at various times, presenting outsized weightings.