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Canada’s main stock index wrapped up the week closing out its worst day in two months on Friday, hit by weakness in energy stocks and central bank Governor Tiff Macklem’s comments that interest rates were not coming down any time soon.

The S&P/TSX composite index was down 249.65 points, or 1.2%, at 20,529.15.

The Bank of Canada on Friday made clear that interest rates would not come down soon, putting it on a divergent path from the U.S. Federal Reserve, which said this week that easing could be on the timetable.

“The Fed is going to do what they need to do. We’re going to focus on what needs to be done here in Canada,” Macklem told a business audience in Toronto after a speech.

Energy was among the top decliners, down 2.5%, while real estate dropped 2.4%. Telecoms fell 3%.

However, the benchmark index posted a weekly rise of 1% as the global risk appetite increased after the U.S. Federal Reserve signaled earlier this week that it could look at interest rate reductions next year.

New York Fed President John Williams put a dent in those expectations after he pushed back on surging market expectations of interest rate cuts. Following William’s comments, traders pared bets on 2024 rate reductions.

Across the border, Wall Street ended little changed but registered a seventh straight week of gains in its longest weekly winning streak since 2017 after this week’s dovish pivot by the Federal Reserve.

“We’ve had such a big run since the 1st of November, so probably some sort of profit taking has to be expected just because there’s so much of a move in the last few weeks,” said Greg Taylor, chief investment officer at Purpose Investments.

On the data front, Canadian housing starts plunged 22% in November compared with the previous month, while a separate reading showed U.S. business activity picked up in December.

The Dow Jones industrial average notched another record high close on Friday, and an index of semiconductors had its biggest weekly gain since May.

“What I think we got this week is that (Fed Chair Jerome Powell) doesn’t want to overly punish the economy with (rates) being higher for longer for no good reason,” said Kim Forrest, chief investment officer at Bokeh Capital Partners in Pittsburgh.

“I don’t know if we’re going to get whatever is considered a Santa Claus rally, but it looks like all things being considered, we could drift higher from here.”

According to preliminary data, the S&P 500 lost 4.52 points, or 0.10%, to end at 4,715.03 points, while the Nasdaq Composite gained 52.36 points, or 0.25%, to 14,798.43. The Dow Jones Industrial Average rose 35.59 points, or 0.10%, to 37,276.95.

The day also marked the expiry of quarterly derivatives contracts tied to stocks, index options and futures, also known as “triple witching.”

Shares of Costco Wholesale jumped after the retailer topped Wall Street estimates for first-quarter results due to demand for cheaper groceries.

Earlier on Friday, a survey showed domestic business activity picked up in December amid rising orders and demand for workers, which could further help to allay fears of a sharp slowdown in economic growth in the fourth quarter.

Reuters, Globe staff

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