FRANK GUNN/The Canadian Press
The Toronto stock market dropped sharply Friday after energy and mining sectors took back major gains seen earlier in the week and data showed the U.S. economy was weaker than expected in the first quarter.
The S&P/TSX composite index dropped 96.10 points to 12,233.41 with the U.S. government reporting gross domestic product grew at a rate of 2.5 per cent in the first quarter. Economists had expected growth of three per cent.
The Canadian loonie was up 0.47 of a cent to 98.43 cents US.
The Dow Jones industrial average was up 14.51 points to 14,715.31, the Nasdaq dipped 12.30 points to 3,277.69 and the S&P 500 declined 4.16 to 1,581.
Despite coming in below expectations, the U.S. GDP growth for the first three months of 2013 was still much better than the 0.4 per cent reported in the October to December period that ended 2012.
"The GDP report did miss consensus but overall, it's still a very positive number," said Jeff Bradacs, portfolio manager at Manulife Asset Management.
"Some people see it as an inventory build there, that the second quarter might be weaker. However, I'd say it was relatively strong number especially when you compare around the globe, the lack of GDP growth. The U.S. actually is standing out, showing some growth relative to Europe and other countries."
The U.S. said much of the gain is from a jump in consumer spending, which rose at an annual rate of 3.2 per cent – the largest increase since the end of 2010. Government spending fell at a 4.1 per cent annual rate, led by another deep cut in defence spending.
Economists forecast that the U.S. GDP will continue to slow in the April to June quarter to a rate of just two per cent growth, and staying at that level for the remainder of the year.
The TSX appears to be headed to close low by the end of the day, on top of a 2.2 per cent slide last week after signs of global economic weakening, especially in China.
All sectors on the Toronto exchange were down, led steep declines in the base metals and mining and energy as markets reacted to the lower than anticipated U.S. GDP numbers.
The TSX was also pulled down by a decline in the financials sector with a decline of 0.6 per cent, led by 1 per cent share value drops by Royal Bank of Canada (TSX:RY) and AGF Management (TSX:AGF) with stocks of $59.87 and $10.80, respectively.
The drops capped off a week of strong advances for these two sectors.
Base metals stocks led decliners with a drop of 2.97 per cent as May copper moved down three cents to US$3.22.
The energy sector slipped 1.30 per cent while the June crude contract fell 54 cents to $93.10 a barrel.
Pipeline and power company TransCanada Corp. (TSX:TRP) reported net earnings below expectations. The company looking to build the Keystone XL pipeline said it had net income of $446-million or 63 cents each share in the first quarter. Comparable earnings a year earlier were $370-million or 52 cents per share – two cents per share below the consensus estimate.
TransCanada said it expects its long-delayed pipeline to be in service in the second half of 2015 – months later than its previous estimate as the company continues to await U.S. government approval for the project. Its shares were down 90 cents of 1.81 per cent to $48.86.
Commodity prices were already weakening before the GDP data was released ahead of the market open.
Oil and metal have risen sharply over the past two days amid data showing U.S. oil inventories growing less than expected last week, a report from Goldman Sachs predicting a rebound in copper prices and hopes that the European Central Bank will cut interest rates next Thursday to boost the continental economy.
Oil is up almost $5 over the last two days, copper up 12 cents.
The price of gold continued to climb as June bullion gained $15.70 to US$1,477.70 an ounce while the gold sector faded 0.76 per cent. This jump comes after gold plunged last week to US$1,361 an ounce, its lowest level in over two years.
Agnico-Eagle Mines Ltd. (TSX:AEM) reported a sharp drop in its first-quarter profits compared with a year ago due to lower gold prices and higher costs. The gold miner, which keeps its books in U.S. dollars, reported after markets closed Thursday that it earned US$23.9-million or 14 cents per share in the quarter, down from $78.5-million or 46 cents per share a year ago.
Revenue for the quarter totalled $423.2-million, down from $474.1-million. Its shares were down 79 cents to $32.86.
The real estate sector was down 0.5 per cent as Brookfield Office Properties Inc. (TSX:BPO) reported US$275-million or 48 cents of net income in the first quarter. That was down from a year earlier but BPO's funds from operations, which are more closely watched by analysts, were up and three cents a share ahead of the consensus estimate. FFO was $189-million, or 33 cents per share, up from US$154-million or 27 cents per share a year earlier. Its shares dropped 15 cents to $18.19.
Shares in Amazon.com Inc. (NYSE:AMZN) faced a sharp drop of $19.60, or 6.17 per cent to $255.21 after the world's largest online retailer reported net income declined in the first three months of the year even though revenue increased 22 per cent. It said it earned $82-million, or 18 cents per share, in the first quarter – seven cents higher than what was expected by analysts polled by FactSet. Revenue rose 22 per cent to $16.07-billion, from $13.19-billion. Analysts expected $16.14-billion.
European bourses were also lower as Britain's FTSE 100 fell 0.59 per cent, Germany's DAX shed 0.5 per cent while France's CAC-40 lost 0.8 per cent.
– With files from Malcolm Morrison