Canada’s main stock index fell on Tuesday, as energy and consumer discretionary stocks dragged the index lower ahead of the Bank of Canada’s interest rate decision on Wednesday, while data showed U.S. business activity contracted.

At 10:22 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 68.95 points, or 0.33%, at 20,562.63.

U.S. business activity contracted for the seventh consecutive month in January, though the downturn moderated across both the manufacturing and services sectors for the first time since September and business confidence strengthened as the new year began.

Magna International slumped 8.6% after the automotive supplier cut its full-year adjusted EBIT margin outlook, bringing the consumer discretionary index down 1.8%.

Commodity-linked stocks took a dive, with both energy and materials down 0.7% and 0.6%, respectively, as commodity prices slipped.

A firmer dollar pulled commodity prices down, making them more expensive for overseas buyers.

Looking ahead, another interest rate hike by the Bank of Canada (BoC) is looming large, with traders leaning towards a 25-basis-point hike on Wednesday.

Canadian dollar dips as equity market rally stalls

The BoC had hiked its overnight lending rate all through 2022, with the current rate sitting at an over 16-year high.

In its previous decision in December, the central bank had signaled its unprecedented tightening campaign was nearing an end.

“The issue for 2023 is going to be watching the lagged effects of the interest rate hikes that occurred last year,” said Brian Madden, chief investment officer at First Avenue Investment Counsel in Toronto.

“The bigger issue for Canada and the U.S. is going to be not so much digesting the rate hikes but resetting expectations for corporate earnings because they are too high, given the macroeconomic environment.”

Metro Inc gained 2.4% after the retailer posted better-than-expected first quarter profits.