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Canada’s main stock index fell on Wednesday as investors worried that accelerating inflation could lead to central banks raising interest rates more rapidly than expected, with the index pulling back from a record high the day before.

The Toronto Stock Exchange’s S&P/TSX composite index ended down 132.59 points, or 0.6%, at 21,461.93, after five straight days of gains. Wall Street also ended lower.

To tackle inflation, the Federal Reserve and the Bank of Canada “may be forced to hike rates at a faster pace,” said Sid Mokhtari, a market technician at CIBC World Markets. “Money is not going to be as cheap as it used to be.”

U.S. consumer prices rose at an annual rate of 6.2% in October, the biggest gain in 31 years, as Americans paid more for gasoline and food.

“I don’t think this is going to change the secular picture for broader equities but in the short-term I would say you are getting a knee-jerk effect,” Mokhtari said.

On Tuesday, the Toronto market notched a record closing high of 21,594.92 after higher commodity prices and buoyant corporate profits helped underpin the market in recent weeks.

The technology sector on Wednesday fell 3.1% as bond yields jumped. Higher yields tend to weigh on companies with high growth prospects, reducing the value of future cash flows.

Energy shares ended 2.2% lower, pressured by a drop in oil prices. U.S. crude oil futures settled 3.3% lower at $81.34 a barrel. Crude prices were hit by a surge in the U.S. dollar after President Joe Biden said his administration was looking for ways to reduce energy costs amid a broader surge in inflation. Brent and U.S. crude futures dropped sharply at the end of the session as traders sold out of riskier assets, including stocks and commodities, driven by expectations that central bankers will take steps to curb rising prices.

Boyd Group Services Inc shares fell 10.1% after the auto repair services company reported third-quarter adjusted profit below estimates.

Limiting the Toronto market’s decline was a 1% gain for the materials sector, which includes precious and base metals miners and fertilizer companies. It was fueled by a rally in gold, considered a hedge against rising prices.

All three major U.S. stock indexes fell, extending their losses throughout the trading day and adding to Tuesday’s sell-off which snapped the S&P 500′s and Nasdaq’s eight-session runs of all-time closing highs.

“It’s not surprising that after what was truly a historic run for the market to take a pause,” said Ross Mayfield, investment strategy analyst at Baird in Louisville, Kentucky. “But we do think there are enough tailwinds heading into year-end to move the market higher.”

The Labor Department’s consumer price index (CPI), delivered a hotter-than-expected jump of 0.9% and the fastest year-on-year gain in 31 years.

The report hinted that the persistently tangled global supply chain could result in the current inflation wave taking longer to abate than many - including the U.S. Federal Reserve - had hoped.

“The inflation story is really the driver that drives all things,” Mayfield added. “It will affect Fed policy and fiscal policy, it’s the driver of interest rates. It’s hard to talk about anything but inflation.”

And Gregory Daco, chief economist of Oxford Economics, believes this report means current price spikes have some staying power.

“I think things will continue to get worse before they get better in terms of the inflation outlook because we don’t see core inflation peaking until sometime in early 2022,” Daco said.

The Dow Jones Industrial Average fell 240.04 points, or 0.66%, to 36,079.94, the S&P 500 lost 38.54 points, or 0.82%, to 4,646.71 and the Nasdaq Composite dropped 263.84 points, or 1.66%, to 15,622.71.

Of the 11 major sectors in the S&P 500 eight closed red, with energy suffering the biggest percentage losses. Utilities led the gainers.

Tech weighed heaviest on the S&P 500, with megacaps Apple Inc and Microsoft Corp among the biggest drags.

Third-quarter earnings season has reached the final stretch, and of the companies having reported, 81% have beaten street expectations.

Walt Disney Co shares dropped more than 4% in after-hours trading after the media company reported disappointing streaming subscriber numbers.

Tesla Inc rose 4.3%, reversing several sessions of declines in the wake of CEO Elon Musk’s polling Twitter users on whether he should sell 10% of his stake in the company he founded.

This comes as rival electric vehicle maker Rivian Automotive Inc made its splash as a publicly traded company, raising $12 billion. Its shares surged 29.1%.

Retail trading platform Robinhood Markets Inc plunged 6.0%, adding to its losses two days after reporting a security breach affecting 5 million customers.

Declining issues outnumbered advancing ones on the NYSE by a 2.26-to-1 ratio; on Nasdaq, a 2.50-to-1 ratio favored decliners. The S&P 500 posted 26 new 52-week highs and 4 new lows; the Nasdaq Composite recorded 95 new highs and 121 new lows. Volume on U.S. exchanges was 11.72 billion shares, compared with the 10.89 billion average over the last 20 trading days.

The benchmark 10-year yield, which jumped as high as 1.592%, was last up 10.4 basis points at 1.5528%.

Reuters, Globe staff

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