U.S. and Canadian stocks closed lower for a second straight session on Wednesday, as investors booked profits with indexes near record levels after Federal Reserve Chair Jerome Powell flagged potentially stretched stock prices.

Investors are trying to gauge the trajectory of rate cuts from the U.S. central bank as it attempts to buttress an economy that has shown signs of a flagging labour market without stoking inflation. With each of the three major U.S. indexes, along with the small-cap Russell 2000, closing at record highs simultaneously for the first time in years earlier this week, Powell said on Tuesday that asset prices appeared fairly highly valued. As his colleagues staked out arguments on both sides of the policy divide, the Fed chair emphasized the tightrope the central bank must walk in upcoming policy decisions.

To some analysts, the comments were reminiscent of those by former Fed Chair Alan Greenspan, who said in a 1996 speech that “irrational exuberance” had pushed up asset values.

Last week’s Fed and Bank of Canada rate cuts helped lift equities in September, typically a weak month for stocks, with investors now banking on further easing by the U.S. central bank to keep the rally alive.

“With the S&P pricing in 23-24 times expected earnings and expectations priced into that multiple of about 15% annualized earnings growth over the next five years, that sounds pretty rich to me,” said Ron Albahary, chief investment officer at LNW in Philadelphia. “So not that we’re market timers at all, but the idea that people might be using this, using the Fed’s comments, Powell’s comments as just a reason to trim back a little bit makes sense to me.”

Some valuation measures for stocks are at their highest level since 2021, and a further climb would elevate them to thresholds not seen in decades, at the height of the internet boom.

The Dow Jones Industrial Average fell 171.50 points, or 0.37%, to 46,121.28, the S&P 500 lost 18.94 points, or 0.28%, to 6,637.98 and the Nasdaq Composite lost 75.62 points, or 0.33%, to 22,497.86.

Materials fell 1.6% and was the worst-performing of the S&P 500 sectors, as Freeport-McMoRan plunged 17% after it declared force majeure at its Grasberg mine in Indonesia and said it is expecting consolidated sales to be lower for copper and gold in the third quarter.

In economic news, data released on Wednesday showed the sales of freshly constructed single-family U.S. homes unexpectedly surged by 20.5% in August.

The S&P/TSX composite index ended down 58.68 points, or 0.2%, at 29,756.95, extending its pullback from a record closing high on Monday. Still, the index was on track for a gain of 10.8% in the third quarter, which would be its fifth straight quarterly advance.

Heavily weighted financials lost 0.7% and the TSX materials group, which includes fertilizer companies and metal mining shares, was down 0.8%. The price of gold declined 0.9%, pulling back from a record high.

The TSX energy sector was up 1.3%, with shares of Vermilion Energy adding 2.9%. The price of oil settled 2.5% higher at US$64.99 a barrel after a surprise drop in U.S. crude inventories added to the market’s sense of tightening supplies.

In company news, Lithium Americas’ shares nearly doubled after Reuters reported on Tuesday that President Donald Trump’s administration was seeking an equity stake of up to 10% in the company. Talks are under way to discuss a government loan exceeding US$2.26 billion for the company’s Thacker Pass lithium project with General Motors, which advanced 2.3%. UBS also upgraded the automaker to “buy” from “neutral.”

Micron Technology ended 2.8% lower in the U.S. after the memory chipmaker reported quarterly results. Oracle declined 1.7% after Bloomberg News said the company was looking to raise $15 billion in corporate bond sales.

Investors’ attention will now shift to the personal consumption expenditures data, the Fed’s preferred inflation gauge, due for release later this week.

Declining issues outnumbered advancers by a 1.88-to-1 ratio on the NYSE and by a 1.35-to-1 ratio on the Nasdaq. The S&P 500 posted 21 new 52-week highs and 10 new lows, while the Nasdaq Composite recorded 85 new highs and 55 new lows. Volume on U.S. exchanges was 18.04 billion shares, compared with the 17.75 billion average for the full session over the last 20 trading days.

Reuters, Globe staff