TORONTO - Canada's main stock index closed lower amid signals about interest rates ahead of a key speech Friday by the Federal Reserve chairman.

“The markets are in a bit of a holding pattern today,” said Candice Bangsund, portfolio manager for Fiera Capital.

The speech by Jerome Powell at Jackson Hole, Wyo., is “going to really give the market a better idea of where the Fed's thinking is at following that first rate cut in July.”

Markets mostly fell Thursday after minutes from the July Fed meeting released Wednesday highlighted opposition within the Fed to reducing interest rates. Two Fed presidents then said in interviews that they didn't believe cuts were required given the relative strength of the U.S. economy.

Bangsund said markets were on the defensive because they were gauging this “hawkish rhetoric” that brought into question the markets' overly aggressive expectations for further rate cuts. Most people expect an interest rate cut in September but some foresee three cuts by the end of the year.

Reducing interest rates will help to steepen the yield curve, which inverted again briefly on Thursday, Bangsund said.

She expects Powell's comments will be “pretty balanced,” acknowledging the health of the U.S. economy but adding that there are prevailing risks that allow the Fed to take a wait-and-see approach.

“What we're going to be searching for are some clues and some clarification as to his thinking on the future policy move given the latest developments,” she said, adding that the Bank of Canada is expected to maintain current rates.

The S&P/TSX composite index closed down 55.77 points at 16,253.46.

In New York, the Dow Jones industrial average was up 49.51 points at 26,252.24. The S&P 500 index was down 1.48 points at 2,922.95, while the Nasdaq composite was down 28.82 points at 7,991.39.

The Canadian dollar traded for an average of 75.23 cents US compared with an average of 75.31 cents US on Wednesday.

Eight of the 11 major sectors of the TSX were lower, led by health care as shares of cannabis producers Canopy Growth Corp. and Aphria Inc. were down 5.2 and 3.5 per cent, respectively.

Consumer staples fell more than one per cent with The Second Cup Ltd. losing 9.2 per cent and Cara Operations Ltd. down 2.4 per cent.

Energy was the third-worst performer on the day as crude prices dropped and U.S. manufacturing activity contracted this month for the first time in a decade.

“Up until now the factory sector in the U.S. has been fairly resilient to the trade uncertainty but the weaker factory data in the U.S.... has weighed on the demand outlook for crude.”

The October crude contract was down 33 cents at US$55.35 per barrel and the October natural gas contract was down 1.4 cents at US$2.16 per mmBTU.

Materials was also lower with the December gold contract down US$7.20 at US$1,508.50 an ounce and the September copper contract down 2.8 cents at US$2.56 a pound.

Technology, financials and consumer discretionary sectors were up slightly.

Financials rose in the United States on a reshaping of investor expectations for rates, which is positive for banks. It was higher in Canada as CIBC beat expectations in its latest quarter and its shares gained 2.1 per cent.