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Wall Street’s main indexes closed lower on Thursday as investors looked to higher-than-expected inflation and unemployment claims for indications on the health of the U.S. economy and the path for interest rates. Bay Street had a better session, with the Canadian benchmark index edging up to another record high close thanks to stronger commodity prices and a weaker Canadian dollar that lifted the energy and materials sectors.

The closely watched U.S. Consumer Price Index rose 0.2% on a monthly basis in September and 2.4% on an annual basis, with both figures being slightly higher than estimated by economists. The core figure, which excludes volatile food and energy prices, rose 3.3% year-over-year, versus an estimate of 3.2%.

In a separate report released on Thursday, jobless claims also rose to 258,000 for the week ending Oct. 5, versus an estimate of 230,000.

“Investors were torn between a stronger than expected CPI report and a weaker than expected unemployment claims report,” said Jack Ablin, chief investment officer at Cresset Capital in Chicago. “One showed inflation running hotter than expected and the other showed the economy looking weaker than expected. It’s the worst of both worlds.”

After the economic data, traders were pricing in a roughly 80% probability that the Federal Reserve will cut rates by 25 basis points at its meeting in November and a roughly 20% chance it would leave rates unchanged, according to CME’s FedWatch.

Atlanta Federal Reserve Bank President Raphael Bostic on Thursday said he would be “totally comfortable” skipping an interest-rate cut at an upcoming meeting of the U.S. central bank, adding that the “choppiness” in recent data on inflation and employment may warrant leaving rates on hold in November.

Chicago Fed President Austan Goolsbee said he sees “gradual” rate cuts over the next year-and-a-half, while the New York Fed’s John Williams said he still sees rate reductions ahead.

North American bond yields were generally softer. The yield on benchmark U.S. 10-year notes inched up 0.4 basis point to 4.071% after reaching 4.12%, while the 2-year note yield, which typically moves in step with interest rate expectations, fell 5.6 basis points to 3.962%.

The Dow Jones Industrial Average fell 57.88 points, or 0.14%, to 42,454.12, the S&P 500 lost 11.99 points, or 0.21%, to 5,780.05 and the Nasdaq Composite lost 9.57 points, or 0.05%, to 18,282.05. Both the S&P 500 and the Dow had notched record closing highs in the previous day’s session.

The Toronto Stock Exchange’s S&P/TSX composite index ended up 77.36 points, or 0.3%, at 24,302.26, moving past the previous day’s record closing high.

The price of oil settled 3.6% higher at US$75.85 a barrel due in part to Middle East supply risks after the recent sharp escalation of Israel’s conflict with Iran. Oil futures also rallied as U.S. fuel use spiked ahead of Hurricane Milton. The energy sector in Toronto climbed 2.2%, while the materials group was up 2.1% as gold and copper prices moved higher.

A weaker Canadian dollar also supported commodity producers. Gold and oil are priced in U.S. dollars, so commodity producers’ revenues increase in Canadian dollar terms when the currency falls against the greenback.

The loonie touched its weakest intraday level since Aug. 7 at 1.3775 per U.S. dollar, or 72.60 U.S. cents, as investors weighed prospects of the Federal Reserve pausing its interest rate cuts and awaited domestic jobs data, due on Friday, that could guide bets on the Bank of Canada outlook.

Heavily weighted financials in Toronto were a drag, falling 0.4%, as TD Bank became the largest bank in U.S. history to plead guilty to violating a federal law aimed at preventing money laundering, and agreed to pay US$3 billion in penalties to resolve the charges. TD’s shares tumbled 5%.

Stateside, only three of the S&P 500′s 11 major industry sectors advanced on Thursday with energy, adding 0.8% and outperforming the rest as oil prices rose.

Investors are also preparing for the third-quarter earnings season, with major U.S. banks scheduled to report results on Friday.

The third-quarter earnings growth rate for the S&P 500 is estimated to come in at 5% year-over-year, according to estimates compiled by LSEG.

In individual U.S. stocks, Delta Air Lines fell 1% after it forecast quarterly revenue below expectations in anticipation of slower travel spending. Other airlines also lost ground with American Airlines, ending down 1.4%.

Shares of Pfizer fell 2.8% as former executives distanced themselves from activist investor Starboard’s campaign against the drugmaker.

On U.S. exchanges, 11.02 billion shares changed hands compared with the 12.06 billion moving average for the last 20 sessions. Declining issues outnumbered advancers by a 1.39-to-1 ratio on the NYSE where there were 185 new highs and 55 new lows. On the Nasdaq, 1,616 stocks rose and 2,576 fell as declining issues outnumbered advancers by a 1.59-to-1 ratio. The S&P 500 posted 22 new 52-week highs and 2 new lows while the Nasdaq Composite recorded 60 new highs and 163 new lows.

Reuters, Globe staff

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