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Traders work on the floor at the New York Stock Exchange, May 7, 2013. (BRENDAN MCDERMID/REUTERS)
Traders work on the floor at the New York Stock Exchange, May 7, 2013. (BRENDAN MCDERMID/REUTERS)

At midday: TSX down despite positive U.S. job claims data Add to ...

North American markets fell Thursday as traders appeared to shrug of a rosier-than-expected report on jobless claims in the United States.

The S&P/TSX composite index was down 21 points to 12,559.24 due to a weakening in gold prices but balanced by a surge in share price for retailer Canadian Tire, which said it planned to unlock the value of its property holdings by creating a REIT.

The Canadian dollar was up 0.03 of a cent at 99.70 cents (U.S.).

The U.S. Department of Labor said unemployment claims dropped by 4,000 last week to a seasonally adjusted 323,000, indicating that layoffs have returned to pre-recession levels and may lead to more hiring. Economists had expected a slight uptick to 358,000.

The department said the four-week average dropped 6,250 to 336,750 – the lowest it’s been since November 2007, one month before the recession began.

Despite the positive news, there was little reaction on Wall Street. The Dow Jones industrials was down 3.75 points to 15,088.29 after it closed above 15,000 for the first time earlier this week.

The Nasdaq fell 2.76 points to 3,410.50, while the S&P 500 futures index dipped 3.75 points to 1,628.94. The S&P closed for the first time over 1,600 on Friday.

Andrew Pyle, a portfolio manager with Scotia MacLeod in Peterborough, Ont., said that it will be difficult for markets to maintain these record levels, which explains some of the small clawbacks.

“One of the problems we have right now is that we have U.S. markets at record highs. A lot of optimism has been pumped into this market,” Pyle said.

“Investors are encouraged by the continued onslaught of central bank stimulus, whether it’s from the Federal Reserve, the Bank of Japan or the European central bank. It is almost gotten to the point now that investors are moving into the equities market because there is less risk – which is a very dangerous perception to have.”

Pyle predicts a major pullback will happen some time in the summer because current levels are “unsustainable in the short run.”

On Thursday, the U.S. also reported that stockpiles held by wholesalers rose 0.4 per cent in March compared with February, when they had fallen 0.3 per cent. Wholesale sales in March dropped 1.6 per cent, the biggest setback since March 2009, when the U.S. was in recession. Sales had risen 1.5 per cent in February.

Inventory rebuilding can be a positive for economic growth because it means stronger production at the nation’s factories.

The markets have been buoyed in recent days by a number of factors, including signs that the U.S. economic recovery is gaining momentum and that Europe’s debt crisis may be easing. But with the U.S. markets now in negative territory, it may be a signal that investors are planning on taking a breather from the record-high levels seen this week.

Commodities were also retreating from Wednesday’s settlement prices when oil, gold and copper all closed at prices not seen in more than a month. It has been a roller-coaster ride recently for commodity prices, which were down earlier in the week.

The June crude contract on the New York Mercantile Exchange declined $1.16 cents to $95.46 (U.S.) a barrel. June gold bullion dropped $9.10 to $1,464.60 (U.S.) an ounce, after have closed up nearly $25 on Wednesday, while July copper was down four cents to $3.33 (U.S.) a pound.

In corporate news, Canadian Tire Corp. Ltd. says it’s planning on creating a $3.5-billion real estate investment trust, with an initial public offering later this year. The announcement came as the iconic retailer announced a 2.9 per cent increase in first-quarter earnings amid a 1.7 per cent increase in total revenue to $2.48-billion from $2.44-billion in the same 2012 quarter. Canadian Tire stock was up nearly 13 per cent, or $9.77, to $83.81.

BCE Inc. reported a 6.6 per cent increase in net earnings in the first quarter, although revenue remained almost unchanged year over year. Canada’s largest communications company says net earnings attributable to common shareholders were $566-million or 73 cents per share, up from $531-million or 69 cents in the same 2012 period. Revenue rose only slightly, to $4.34-billion from $4.33-billion. Shares in BCE fell slightly by 0.40 per cent, or 19 cents, to $47.73.

Meanwhile, Bombardier Inc. saw a more than four per cent uptick in its shares to $4.43 after it reported a 25 per cent increase in revenue in the first quarter to $4.3-billion (U.S.) and said its new CSeries airliner remains on schedule. The Montreal-based plane and train builder says net income was down eight cents per share at $148-million (U.S.), but up eight cents on an adjusted basis at $156-million.

Overnight, world markets declined after higher than expected inflation figures were released from China and investors cashed in on some recent gains.

Government figures showed China’s consumer price index rose 2.4 per cent in the year to April, up from 2.1 per cent the previous month and ahead of expectations of a more modest advance of 2.2 per cent.

In Europe, Germany’s DAX, which has set a series of record highs, was up a further 0.3 per cent at 8,272. The CAC-40 in France was 0.4 per cent lower at 3,942 while the FTSE 100 index of leading British shares rose 0.2 per cent to 6,597, unaffected by the expected decision by the Bank of England to keep its monetary policy unchanged.

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