Canada's main stock index declined by more than 100 points on Wednesday despite strength in energy stocks as the price of oil climbed higher, which wasn't enough to offset broad-based losses.

The S&P/TSX Composite Index was down 120.17 points, or 0.61 per cent, at 19,435.98.

“What we've seen is that September is living up to its reputation for being a challenging month for the markets, said Edward Jones senior investment strategist Angelo Kourkafas.

“The markets are trying to find some short-term support after three to four weeks of declines. The root, really, why we are seeing valuations get pressured, is that markets are trying to digest the higher-for-longer rate story as central banks are trying to push back against expectations for rate cuts.”

September is on track to be Wall Street’s worst month of 2023 as it tries to absorb a recent leap by Treasury yields which have reached heights unseen in more than a decade. 

In New York, the Dow Jones Industrial Average was down 68.61 points at 33,550.27. The S&P 500 Index was up 0.98 of a point at 4,274.51, while the Nasdaq Composite was up 29.24 points at 13,092.85.

Other factors contributing to a pullback include rising oil prices, as crude rallied further above US$90 per barrel on Wednesday.

The November crude contract was up US$2.92 at US$93.31 per barrel, a new high for the year.

In recent days, a number of analysts have revised their forecasts with the view that triple-digit oil prices may now be in the cards for this fall amid strong global demand.

“At a very high level, rising and high oil prices act as a tax on the consumer, so whatever money you spend on gasoline prices is not spent, in theory, in other places,” said Kourkafas.

The November natural gas contract was up five cents at US$2.90 per mm/BTU, the December gold contract was down US$28.90 at US$1,890.90 an ounce and the December copper contract was down a penny at US$3.64 a pound.

Kourkafas said other concerns south of the border surround the potential for a U.S. government shutdown and the ongoing autoworkers strike.

Both the Bank of Canada and the U.S. Federal Reserve have said their focus amid rate decisions has been to quell core inflation, which strips out the impact of volatile energy costs. 

The central banks have left the door open to additional rate hikes this year, prompting a “recalibration of expectations” by the markets in recent weeks, said Kourkafas.

He said only “modest" rate cuts may be in the cards over the coming years.

“This is based on an assumption that economic growth is going to stay resilient, but if it doesn't, if economic data is underwhelming, I think central banks will be in a position to possibly cut rates more than they are signalling right now,” he added.

The Canadian dollar traded for 73.99 cents U.S., compared with 74.02 cents on Tuesday.

— With files from The Associated Press

This report by The Canadian Press was first published Sept. 27, 2023.