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Markets in the U.S. largely gave back the gains they made Thursday after the successful market debut of semiconductor firm Arm Holdings Inc. helped boost stocks. 

The S&P/TSX composite index closed up 54.50 points at 20,622.34.

In New York, the Dow Jones industrial average was down 288.87 points at 34,618.24. The S&P 500 index was down 54.78 points at 4,450.32, while the Nasdaq composite was down 217.72 points at 13,708.33.

The TSX more or less broke even while U.S. markets sank largely due to the difference in index composition, noted Michael Greenberg, senior vice-president and portfolio manager at Franklin Templeton Investment Solutions.

Canadian markets are more exposed to commodities, helping boost the index, while tech plays a much larger role in the U.S. The tech-focused Nasdaq led losses south of the border, falling 1.56 per cent. 

“When you have technology shares fairly challenged, that’s obviously going to affect the U.S. a lot more than Canada,” said Greenberg. 

One major player on the Nasdaq weighing on the sector was Nvidia, with shares in the company down 3.69 per cent, while Microsoft lost 2.50 per cent. 

Tech shares are generally more sensitive to higher interest rates, and have reacted more dramatically than other areas of the market in recent months to indications that inflation is sticky or that rates will need to stay higher for longer. 

This week saw a number of economic reports showing that consumers continue to be resilient in the face of higher interest rates, as does the labour market.

“The more core parts of the inflation story, whether it be labour, services, is just proving to be a little bit stickier,” Greenberg said. This suggests interest rates, while they may not need to rise much more, need more time to work through the system, he said. 

Next week the U.S. Federal Reserve is due for its next interest rate decision. The central bank is expected to hold its key rate, and could hike again later in the year, said Greenberg.

But the bigger question is whether the rate cuts the market is pricing in for next year are too optimistic, he said, and what rates could look like over the longer term. 

“From a cyclical standpoint, we do expect rates will start to go down next year,” he said. But over the longer term, Greenberg said he expects more volatility.

“Inflation may be a little bit stickier at times, you know, jump around a little bit more, which means interest rate policy might need to be a little bit higher,” he said. 

The Canadian dollar traded for 73.93 cents US compared with 73.99 cents US on Thursday.

The November crude contract was up 41 cents at US$90.02 per barrel, and the October natural gas contract was down six cents at US$2.64 per mmBTU.

The December gold contract was up US$13.40 at $1,946.20 an ounce and the December copper contract was down two cents at US$3.80 a pound.

This report by The Canadian Press was first published Sept. 15, 2023.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD=X)

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The Canadian Press

The Canadian Press

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The Canadian Press is a national wire service that provides real-time stories for more than 600 media companies.

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