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U.S. and Canadian stocks closed modestly higher on Tuesday after four sessions of declines, but investors fretted about weak holiday shopping and rising bond yields added pressure after the Bank of Japan’s surprise tweak of its monetary policy.

Fears about the economic impact of the Federal Reserve’s plan to keep raising U.S. interest rates have weighed heavily on equities since its policy meeting last week.

Adding to pressure on equity prices was an increase in U.S. Treasury yields after the BOJ made a surprise tweak to its bond yield control that allows long-term interest rates to rise more. In the U.S., the yield on the 10-year Treasury rose to 3.68% from 3.59% late Monday. The Canadian 10-year government bond yield was up 13 basis points by late afternoon to just above 3% - its highest level since the end of November.

“Japan has been consistently consistent for many years,” said Matthew Keator, managing partner in the Keator Group, a wealth management firm in Lenox, Massachusetts. “The slightest tweak in their policy has investors scratching their heads as to how to interpret that going forward.”

Investors were also worrying about the current quarter earnings season and the winter holiday shopping season.

“We came into it with some pretty reasonable expectations but retailers are having to do massive sales,” said Carol Schleif, Deputy Chief Investment Officer, BMO family office in Minneapolis, Minnesota noting that this shopping season consumers are veering more toward “services and events - vacation tickets and restaurant gift certificates and things like that - as opposed to another sweater or another bag.”

Also on Tuesday, data showed U.S. single-family homebuilding tumbled to a 2-1/2 year low in November and permits for future construction plunged as higher mortgage rates continued to depress housing market activity.

Schleif noted that investors are wary after a volatile year in equities with the S&P on track for its biggest annual decline since the 2008 financial crisis.

“People have gotten their heads handed to them all year and they’re not confident enough to want to step in,” she said.

“That’s what leads to this push me pull you kind of market where it’s up a little down a little and it’s really hard for any segment of the investing public to want to get to want to spin a narrative they would put a whole bunch of money behind.”

In Canada Tuesday, a weaker U.S. dollar bolstered resources shares on the TSX. The S&P/TSX composite index ended up 106.13 points, or 0.6%, at 19,306.89. On Monday, it posted its lowest closing level since Oct. 25.

“A weaker U.S. dollar is good for commodity prices, good for the TSX, good for the Canadian dollar,” said Philip Petursson, chief investment strategist at IG Wealth Management. “This is a trend I can see continuing into 2023.”

The energy sector rose 1.2%, while the materials group, which includes precious and base metals miners and fertilizer companies, was up 1.9% as gold and copper prices climbed.

Together, the two sectors account for 31% of the TSX’s weighting.

The materials group was helped by a 24.4% jump in the shares of Iamgold Corp after the miner sold its assets in Senegal, Mali and Guinea for $282 million to Moroccan mining company Managem.

In contrast, shares of First Quantum Minerals Ltd ended 5.6% lower after Panama ordered the company to make a plan to halt work at its copper mine in the country.

Financials, the sector with the heaviest single weighting on the TSX, advanced 0.7%, with the rise in bond yields lending support. Higher bond yields tend to increase the margins that banks earn on the cash they hold on behalf of their customers.

Canada’s consumer price index report for November, due on Wednesday, is expected to show the annual rate of inflation easing to 6.7% in November from 6.9% in October.

Money markets see roughly a 40% chance that the BoC will raise interest rates further at its Jan. 25 policy decision.

On Wall Street, the Dow Jones Industrial Average rose 92.2 points, or 0.28%, to 32,849.74, the S&P 500 gained 3.96 points, or 0.10%, to 3,821.62 and the Nasdaq Composite added 1.08 points, or 0.01%, to 10,547.11.

Among the S&P 500′s 11 major sectors, the energy index gained most, finishing up 1.52% as crude oil prices rose.

Of the four sectors that declined, consumer discretionary was the weakest, finishing down 1.13%.

The Dow Jones Transport average closed down 1.3% after underperforming the broader market throughout the session following JPMorgan’s bearish research on transport companies.

FedEx Corp closed down 2.6% ahead of its quarterly report. But shares in the delivery company, which spooked the entire market in September by pulling its financial forecast, were last up more than 3% in volatile after the bell trading following its fiscal second-quarter report and 2023 guidance.

General Mills Inc shares sank 4.6% after quarterly sales at its high-margin pet business took a hit due to key retailers cutting back on inventory, overshadowing an increase in its full-year earnings and sales forecast.

Tesla Inc shares tumbled 8% after at least three brokerages cut the electric vehicle maker’s target price on growing concerns of demand weakness and risk from Chief Executive Elon Musk’s struggles at Twitter.

Wells Fargo & Co slid 2% after U.S. regulators fined the lender $3.7 billion, citing widespread mismanagement of auto loans, mortgages and deposit accounts.

Advancing issues outnumbered declining ones on the NYSE by a 1.12-to-1 ratio; on Nasdaq, a 1.06-to-1 ratio favored advancers.

The S&P 500 posted 1 new 52-week highs and 14 new lows; the Nasdaq Composite recorded 64 new highs and 399 new lows.

On U.S. exchanges 10.52 billion shares changed hands, compared with the 11.15 billion average for the last 20 trading days.

Reuters, Globe staff

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