TORONTO - North American stock markets closed modestly in the red as positive economic data south of the border increased the odds that the U.S. Federal Reserve will hike interest rates before the end of the year.

In Toronto, the S&P/TSX composite index lost 36.82 points at 14,689.04 — with gold stocks, down 2.30 per cent, leading the way. The materials sector was close behind, falling 1.80 per cent.

Energy stocks were one of few sectors of the TSX to advance on Monday, up 0.63 per cent as oil prices ticked higher. The November crude oil contract was up 57 cents at US$48.81 per barrel.

The oil-sensitive loonie was at 76.28 cents US, up 0.04 of a cent from Friday.

South of the border, the Dow Jones industrial average fell 54.30 points to 18,253.85, while the S&P 500 declined 7.07 points to 2,161.2. The Nasdaq composite lost 11.13 points at 5,300.87.

Andrew Pyle, a portfolio manager at ScotiaMcLeod in Peterborough, Ont., said a U.S. report by the Institute for Supply Management indicating that manufacturing activity grew last month may have increased concerns that a rate hike is imminent.

The ISM report said its manufacturing index rose to 51.5 per cent last month. A figure above 50 indicates that manufacturing activity is expanding.

Meanwhile, September auto sales in the U.S. were down slightly by 0.5 per cent compared to a year ago, but still higher than analysts had expected.

"The market put those two things together and came away with the conclusion that there is even better odds of a Fed rate hike this year," said Pyle.

"That's really what was behind what I would call modest declines on both sides of the border."

Earlier in the day, Britain's plans for leaving the European Union weighed on global markets.

The British pound fell nearly one per cent following U.K. Prime Minister Theresa May's remarks during a speech that the formal process of exiting the European Union will begin by March of next year.

In commodity news, November natural gas gained 1.7 cents at US$2.92 per mmBtu, the December gold contract fell $4.40 to US$1,312.70 an ounce, and December copper contracts fell 1.8 cents to US$2.19 a pound.

Pyle said traders can expect a volatile month on the markets as a number of major global economic events — including the upcoming U.S. election, the possibility of an interest rate hike by the U.S. central bank and Brexit — loom large.

"The market is much more jittery right now, much more sensitive to anything," said Pyle.

"Even though we didn't see big swings today, which was great, I think we still have a market of nervous investors right now, who are kind of anticipating all of these things in front of us and not willing to bet the farm on the market continuing to go up as it did during the months of July and August."

Follow @alexposadzki on Twitter.

News from © The Canadian Press, 2016