Canada’s main stock index closed at its lowest point since October last year as part of a pullback that saw sharper drops in U.S. markets.

The S&P/TSX Composite Index ended down 156.26 points, or 0.81 per cent, at 19,020.92.

In New York, the Dow Jones Industrial Average closed down 430.97 points at 33,002.38. The S&P 500 Index was down 58.94 points at 4,229.45, while the Nasdaq Composite was down 248.31 points at 13,059.47.

The downward trend came after U.S. job opening data surprised to the upside, indicating continued strength in the economy and the potential need for interest rates to go higher.

Tuesday’s report showed American employers were advertising 9.6 million job openings at the end of August, much higher than the 8.9 million that economists expected.

“This is a bit of a surprise increase to see that, and shows that the labour market is still tight,” said Brianne Gardner, senior wealth manager with Velocity Investment Partners at Raymond James Ltd.

The news drove bond yields up and stocks down on increasing expectations that the U.S. Federal Reserve would have to be more aggressive on interest rates as it looks to slow the strong economy that's helping keep inflation elevated.

"The market is now shifting back to interest rates, potentially keeping things higher for longer," said Gardner.

Challenges with inflation could also be compounded as crude prices remain elevated. The November crude contract was up 41 cents at US$89.23 per barrel, rebounding somewhat from a decline on Monday that put pressure on Canadian energy stocks.

The boost in the price of oil helped keep the TSX energy index in positive territory; industrials and telecoms also managed slight gains.

Financials on the TSX were especially under pressure with the index down 1.5 per cent, while information tech, utilities and metals also fell.

The November natural gas contract was up 11 cents at US$2.95 per mm/BTU. The December gold contract ended down US$5.70 at US$1,841.50 an ounce and the December copper contract was down two cents at US$3.62 a pound.

The potential for a further rate hike from the Fed also kept pressure on the Canadian dollar, which traded for 72.93 cents U.S. compared with 73.96 cents U.S. on Friday.

Markets could see increased volatility ahead as October has historically shown to have larger market swings, said Gardner, leaving her to be positioned defensively for the weeks ahead. 

"I think we could expect further turmoil in October before potentially seeing a later Santa Claus rally."

This report by The Canadian Press was first published Oct. 3, 2023.