Canada's main stock index closed down by almost 50 points, while U.S. stock markets were mixed on the final trading day of what has been a difficult month for investors.

The S&P/TSX Composite Index was down 49.47 points, or 0.25 per cent, at 19,541.27.

In New York, the Dow Jones Industrial Average was down 158.84 points at 33,507.50. The S&P 500 Index was down 11.65 points at 4,288.05, while the Nasdaq Composite was up 18.05 points at 13,219.32.

The day’s trading closed out the third quarter of 2023 and marked the end of what has been a volatile September for markets. The S&P/TSX composite has declined more than three-and-a-half per cent since the end of August, as investors grappled with a growing sense that interest rates may not be coming down anytime soon.

Last week, the U.S. Federal Reserve indicated it may not reduce rates by as much as investors previously anticipated. The higher-for-longer mentality is putting pressure on global bond markets and spurring worries that the economy may suffer under the weight of the interest rate burden.

“We’re in this higher rate environment and the Fed has been telling us this for months ... don’t expect rate cuts as long as inflation stays sticky,” said Ashish Utarid, assistant vice-president of investment strategy with IG Wealth Management.

Soaring oil prices have been another factor adding to traders' interest rate fears this September. While the November crude contract was down 92 cents at US$90.79 per barrel Friday, it reached an all-time yearly high just two days before.

Markets remain concerned about what high energy prices will mean for inflation and interest rates going forward, Utarid said.

“Higher oil prices result in higher gas prices, and that takes a lot of oxygen out of the economy,” he said.

But higher oil prices have also provided a boost for Canadian energy companies and energy stocks, with the TSX capped energy index having risen 20 per cent over the last three months.

The Canadian dollar traded for 73.96 cents U.S. compared with 74.11 cents U.S. on Thursday.

The November natural gas contract was down two cents at US$2.93 per mm/BTU.

The December gold contract was down US$12.50 at US$1,866.10 an ounce and the December copper contract was up three cents at US$3.74 a pound.

Looking ahead to the fourth quarter of 2023, Utarid said September’s volatility may have been a preview of things to come. He said he's monitoring the potential federal government shutdown south of the border.

“It’s impossible to predict how that will affect the markets, but it will definitely be a hit to consumer confidence,” Utarid said, adding a federal shutdown could also delay the release of some crucial U.S. government reports on jobs data and inflation.

Without that data, it could make it harder for the Fed to make upcoming decisions about interest rates.

“When you increase investor anxiety, you get volatility in the market. And that’s the last thing we need heading into the last quarter of the year,” he said. 

This report by The Canadian Press was first published Sept. 29, 2023.