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Canada’s main stock index edged lower on Thursday in its third consecutive day of declines, as inflation fears persisted and expectations grew that the U.S. Federal Reserve will tighten policy in the coming months. Wall Street also ended the day lower, closing out its worst quarter since early 2020.

The Toronto Stock Exchange’s S&P/TSX composite index ended the day down 88 points, or 0.44%, at 20,070.25, its lowest close since July 20.

The benchmark ended September 2.5% lower and lost 0.5% over the third quarter of 2021, the worst three-month period since the first quarter of 2020 in the early days of the pandemic.

“Stocks and bond markets seem to be taking inflation more seriously lately ... correctly in our view,” said Goodreid Investment Counsel Portfolio Manager Brian Madden.

“The supply chain/logistics/commodities-driven inflation is likely to abate in coming quarters, but the ‘demand pull’ inflation may be more lasting as household balance sheets are strong ... and wage inflation and labor shortages are becoming more prevalent.”

U.S. bond yields inched lower but held close to their highest levels in months.

The TSX’s consumer cyclicals sector was the biggest loser, falling 1.9% to its lowest close since March, followed by industrials, with a 1% decline.

Higher yields reduce the value of future cash flows, so they particularly hurt the shares of companies with high growth prospects.

Bombardier Inc jumped 3.4%. The company said on Thursday it had received a firm order worth $534 million for 20 units of an upgraded variant of its Challenger 350 aircraft, marking its biggest business-jet deal this year.

Rogers Communications Inc dropped 0.8%. The company said late on Wednesday that Chief Financial Officer Tony Staffieri had stepped down after more than a decade in the role.

All three Wall Street major indexes ended lower and posted their worst quarters in at least 12 months, following a tumultuous month and period wracked by concerns over COVID-19, inflation fears and budget wrangling in Washington.

The U.S. Senate and House approved a stopgap spending bill to keep the government running late in the session, but after a brief market uptick, stocks resumed their decline, dragging even the Nasdaq into the red after trending higher most of the day.

“The market’s been resilient, but the risk tied up in the policy headlines over the debt ceiling, the chaos around these spending bills is weighing on the markets a bit as the quarter comes to a head,” said Ross Mayfield, investment strategy analyst at Baird in Louisville, Kentucky.

“In a larger context it’s been pretty mild. We’re coming on the heels of seven ‘up’ months and volatility’s been fairly muted despite the headline risks, not to mention COVID-19 and tapering,” Mayfield added. “The market had to take a pause, and a pause is necessary and probably to be expected.”

All three major U.S. stock indexes had their worst quarterly performance since the opening months of 2020, when the COVID-19 pandemic brought the global economy to its knees.

The S&P and Nasdaq posted modest gains over the July-to-September period, while the Dow suffered a quarterly loss.

For the month, all three indexes gave their worst quarterly performance in 12 months or more.

The tug-of-war between growth and value persisted throughout the month and quarter.

“It’s no surprise as we’ve seen yields tick higher you’ve seen the outperformance of value,” Mayfield said. “We expect yields to tick higher to the end of the year and cyclical and value performance to accompany that.”

On the economic front, initial jobless claims unexpectedly edged higher for the third straight week. Market participants now look to consumer spending, inflation and factory activity data expected on Friday for signs of economic health and clues regarding the U.S. Federal Reserve’s shifting timeline for tapering its asset purchases and hiking key interest rates.

Fed Chairman Jerome Powell, along with Treasury Secretary Janet Yellen, testified before the U.S. House Committee on Financial Services, even as wrangling continued on Capitol Hill over funding the government in the face of a looming deadline and the threat of potential shutdowns and credit default.

Unofficially, the Dow Jones Industrial Average fell 556.48 points, or 1.62%, to 33,834.24, the S&P 500 lost 53.22 points, or 1.22%, to 4,306.24 and the Nasdaq Composite dropped 68.14 points, or 0.47%, to 14,444.30.

Reuters

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