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The market is still, however, somewhat a day behind what's going on in the U.S., said Sadiq Adatia, chief investment officer at BMO Global Asset Management.

"Canada's playing a little catch up from yesterday's rally in the market," said Adatia.

While the Canadian market recovered Tuesday, U.S. markets were already shifting more to worry about indicators of a slowing economy, more so than the excitement on Monday about how a slowdown could lead to interest rate cuts.

"You're seeing still a bit of confusion by markets at the moment," said Adatia.

"Today people are questioning, well, is that a good thing that we're getting rate cuts because the economy is bad? I think the market is still grappling with that information."

Data out Tuesday showed weaker-than-expected activity for U.S. businesses in services industries like transportation and retail, adding to the disappointing job numbers Friday that included big revisions on past results.

The data saw the S&P 500 swing from its worst day since May on Friday to its best since May on Monday, while Tuesday markets were lower.

In New York, the Dow Jones industrial average was down 61.90 points to 44,111.74. The S&P 500 index was down 30.75 points at 6,299.19, while the Nasdaq composite was down 137.03 points at 20,916.55. 

Canada's main index made gains despite the September crude oil contract falling US$1.13 to US$65.16 per barrel. 

The fall in crude came as OPEC continued to increase production while demand isn't keeping up. The risk premium on Middle East instability is also fading, said Adatia.

"So it's going back to the fundamentals where you do have a bit of oversupply, versus demand and that's bringing down, obviously, the oil price."

The energy index on the TSX was still up Tuesday as part of a broad rally across much of the market, especially in technology where Shopify Inc. shares rose seven per cent, while elsewhere Brookfield Corp. was up 2.7 per cent, Canadian Pacific Kansas City Ltd. up 2.8 per cent and Barrick Mining Corp. up 5.4 per cent.

The Canadian market was also helped by the potential for U.S. rate cuts as it could also mean greater chances for more Canadian cuts ahead, said Adatia.

"If the Fed is looking at rate cuts, the Bank of Canada's got to be doing the same thing, because it has the uncertainty of this 35 per cent tariff that's still out there for us, and it has a weaker economy than the U.S. does as well."

Wednesday will make for a bit of a clearer picture on what's happening with the Canadian market though after settling out from the holiday, he said.

"We'll really get a sense tomorrow when both markets are back to their normal tendencies."

The Canadian dollar traded for 72.54 cents US compared with 72.48 cents US on Friday.

The December gold contract was up US$8.30 at US$3,434.70 an ounce.

-- With files from The Associated Press.

This report by °µÍø½ûÇø was first published Aug. 5, 2025.

Note to readers:This is a corrected story. A previous version included the wrong Canadian dollar figure for Friday.