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Canada’s main stock index edged lower on Tuesday, consolidating some recent gains for a second day, as investors weighed signs of a weaker economy both domestically and in the U.S. A drop in commodity prices pressured the energy and materials sectors.

The S&P/TSX composite index ended down 34.28 points, or 0.2%, at 20,375.93. It followed a modest loss on Monday after posting on Friday its highest closing level in 2-1/2 months. U.S. indexes ended Tuesday trading mixed.

“We’re coming off a month of euphoria in November and maybe a little bit of reality is beginning to settle into the market,” said Michael Sprung, president at Sprung Investment Management.

The TSX was up 7.2% in November, its biggest monthly advance in three years, as investors grew hopeful that the Federal Reserve and the Bank of Canada are done hiking interest rates.

The Canadian central bank is expected to leave its benchmark interest rate on hold at a 22-year high at a policy decision on Wednesday and then begin cutting rates next year as inflation and the economy show signs of slowing.

The downturn in Canada’s service sector deepened in November as increased borrowing costs and worries about a potential recession weighed on activity, S&P Global Canada services PMI data showed on Tuesday. Meanwhile, U.S. job openings dropped in October to the lowest level since early 2021, indicating that the labour market there was easing.

“As interest rates rise and as demand slows, companies are pulling back on job openings, which is essentially what the Fed wants,” said Sam Stovall, chief investment strategist at CFRA Research in New York.

“The Fed probably is done raising rates, and the only question outstanding is when they start to cut,” Stovall said.

The TSX energy sector fell 1.2% as the price of oil settled nearly 1% lower at US$72.32 a barrel.

Gold also fell, extending its pullback from Monday’s all-time high. The materials group, which includes precious and base metals miners, lost 1.4%.

Technology was among the TSX sectors that gained ground, rising 1.4%, while consumer staples added 0.5%.

Wall Street’s most valuable companies rose as Treasury yields dipped to multi-month lows amid the weak economic data Tuesday. Nvidia and Apple rose more than 2%, while and Tesla gained more than 1%.

The S&P 500 declined 0.06% to end the session at 4,567.18 points. The Nasdaq gained 0.31% to 14,229.91 points, while Dow Jones Industrial Average declined 0.22% to 36,124.56 points.

The small-cap Russell 2000 index fell 1.4%, ending a four-day winning streak.

U.S. stock trading this week has been uneven after the S&P 500 rebounded nearly 9% in November. The index on Friday touched a four-month intra-day high.

Stock market investors widely expect the Fed will keep rates unchanged at its meeting next week. Interest rate futures also suggest a 65% probability of a rate cut by the Fed’s March meeting, according to the CME Group’s FedWatch tool.

On Friday, the more comprehensive non-farm payrolls report for November will offer greater clarity on the state of the labor market.

Global markets will be swayed by greater volatility in 2024 as the Fed cuts benchmark interest rates fewer times than futures markets are pricing in, strategists at the BlackRock Investment Institute predicted in a panel discussion.

Take-Two Interactive Software dipped 0.5% after a trailer of the latest installment of its best-selling “Grand Theft Auto” videogame franchise was released.

CVS Health jumped 3.7% after forecasting 2024 revenue above Wall Street estimates, as the insurer expects to benefit from its expansion into health services.

Declining stocks outnumbered rising ones within the S&P 500 by a 4.5-to-one ratio.

The S&P 500 posted 15 new highs and no new lows; the Nasdaq recorded 83 new highs and 69 new lows.

Volume on U.S. exchanges was relatively heavy, with 11.9 billion shares traded, compared to an average of 10.6 billion shares over the previous 20 sessions.

Of the 11 S&P 500 sector indexes, eight declined, led lower by energy, down 1.7%, followed by a 1.37% loss in materials.

Reuters, Globe staff

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