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U.S. and Canadian stocks closed lower on Tuesday, with the S&P 500 declining for the fourth straight session, as skittish investors fretted over Federal Reserve rate hikes and further talk of a looming recession.

The S&P/TSX Composite Index fell to a two-week low, ending below 20,000, with lower oil prices weighing on resource shares and investors bracing for another interest rate hike by the Bank of Canada. All 10 of the TSX’s major sectors lost ground, including a decline of 3.5% for the energy sector. That matched the decline for U.S. crude prices, which settled at US$74.25 a barrel, as global demand concerns weighed.

Future economic growth prospects were in focus on Tuesday following comments from financial titans pointing toward uncertain times ahead.

Bank of America Corp’s chief executive predicted three quarters of mild negative growth next year, while JPMorgan Chase and Co’s CEO Jamie Dimon said inflation will erode consumer spending power and that a mild to more pronounced recession was likely ahead.

Their comments came on the heels of recent views from BlackRock and others that believe the U.S. Federal Reserve’s aggressive monetary tightening to combat stubbornly high price rises could induce an economic downturn in 2023.

“The market is very reactive right now,” said David Sadkin, president at Bel Air Investment Advisors.

He noted that while markets traditionally reflect the future, right now they are moving up and down based on the latest headlines.

Fears about economic growth come amid a re-evaluation by traders of what path future interest rate hikes will take, following strong U.S. data on jobs and the services sector in recent days.

Money market bets are pointing to a 91% chance that the U.S. central bank might raise rates by 50 basis points at its Dec. 13-14 policy meeting, with rates expected to peak at 4.98% in May 2023, up from 4.92% estimated on Monday before service-sector data was released. For Canada, money markets are betting on a 25-basis-point increase when the BoC meets to set policy on Wednesday but a slim majority of economists in a Reuters poll expect a larger move.

The S&P 500 rallied 13.8% in October and November on hopes of smaller rate hikes and better-than-expected earnings, although the expectation for slower rate hikes could be undermined by further data releases, including producer prices due out on Friday.

“The market got ahead of itself at the end of November, but then we got some good economic data, so people are re-evaluating what the Fed is going to do next week,” said Bel Air’s Sadkin.

On Tuesday, Meta Platforms Inc dragged down markets, with its shares sliding 6.8% following reports that European Union regulators have ruled the company should not require users to agree to personalized ads based on their digital activity.

However, technology names generally suffered as investors applied caution toward high-growth companies whose performance would be sluggish in a challenging economy. Apple Inc, Amazon.com Inc and Alphabet Inc fell between 2.5% and 3%, while the tech-heavy Nasdaq was pulled lower for a third straight session.

Most of the 11 major S&P sectors declined, with energy and communications services joining technology as leading laggards. Utilities, a defensive sector often preferred during times of economic uncertainty, was the only exception, gaining 0.7%.

The Dow Jones Industrial Average fell 350.76 points, or 1.03%, to close at 33,596.34, the S&P 500 lost 57.58 points, or 1.44%, to finish at 3,941.26 and the Nasdaq Composite dropped 225.05 points, or 2%, to end on 11,014.89.

Banks are among the most sensitive stocks to an economic downturn, as they potentially face negative effects from bad loans or slowing loan growth. The S&P banks index slipped 1.4% to its lowest close since Oct. 21.

Volume on U.S. exchanges was 11.01 billion shares, in line with the average for the full session over the last 20 trading days. The S&P 500 posted three new 52-week highs and nine new lows; the Nasdaq Composite recorded 52 new highs and 262 new lows.

In Toronto, heavily weighted financials fell 0.9%, while technology ended 2.1% lower.

Pot stocks Canopy Growth and Tilray Brands lost 16.4% and 12.7%, respectively, after rallying for five straight sessions on expectations of a positive update on a pivotal U.S. banking bill that could provide further legitimacy to the sector.

Shares of Cenovus Energy Inc were down 3.6% as the company forecast higher capital expenditure and production in 2023.

Reuters, Globe staff

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