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The screens at the TMX Broadcast Centre in Toronto show the closing numbers of the TSX on Tuesday, July 3, 2012. (Matthew Sherwood For The Globe and Mail)
The screens at the TMX Broadcast Centre in Toronto show the closing numbers of the TSX on Tuesday, July 3, 2012. (Matthew Sherwood For The Globe and Mail)

Inside the Market

At the open: Indexes struggle, Apple hits lowest level since 2011 Add to ...

The major U.S. and Canadian indexes were trading lower just past 10 a.m. (ET), surrendering some mild gains from earlier this morning as some disappointing U.S. economic figures were released.

The S&P/TSX composite index was down 15 points, or 0.1 per cent, at 11,931; the S&P 500 was down 0.6 per cent at 1,543; and the Dow Jones industrial average was down 0.4 per cent at 14,553.

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The TSX opened with modest gains, although U.S. indexes were struggling to make any headway. But renewed selling hit all the indexes after the U.S. reported leading economic indicators for March declining 0.1 per cent, versus expectations for a 0.1 per cent gain - plus a disappointing reading in the March Philadelphia Fed Survey's general business conditions index. It came in at 1.3, far below the 3.3 reading that economists had forecast.

Commodity prices were generally higher, with oil up about 0.6 per cent and gold up 0.3 per cent. But copper, which tends to trade in anticipation of future economic conditions, was off nearly 1 per cent after slipping into a bear market on Wednesday - defined as a drop of at least 20 per cent from recent highs.

The U.S. released initial jobless claims this morning, and they provided a little bit of hope that the employment situation is stabilizing after signs of deterioration over the past couple of months. They rose by 4,000 to 352,000 last week, just modestly more than economists had forecast.

Trading today is dominated by a slew of big-cap U.S. earnings, which are under a lot of scrutiny given the market's concerns about whether corporate health is strong enough to justify the big rally in U.S. equities this year.

So far, the earnings season has continued the trend from recent quarters where the majority of companies announce better-than-expected profits - but top-line results have been much less encouraging. Of the S&P 500 stocks that have reported first-quarter results prior to today, 71 per cent have beaten analysts' predictions on earnings but only 52 per cent on sales, according to Bloomberg data.

Nokia was leading decliners among those that reported earnings this morning. It was down nearly 12 per cent after revealing a 20 per cent drop in sales as phone volumes tumbled 30 per cent from the previous quarter. It forecast margins in its devices and services business would be “approximately negative 2 per cent” in the second quarter, down from a positive 0.1 percent in the first quarter.

Morgan Stanley shares were down 2 per cent after the bank reported adjusted first quarter earnings of 61 cents, 4 cents better than Street expectations. Revenue of $8.50-billion beat expectations for $8.34-billion. But some other parts of its balance sheet weren't nearly as impressive, including fixed-income trading revenue.

PepsiCo Inc. shares were rallying 5 per cent, after the drink maker reported adjusted per-share earnings of 77 cents, up 12 per cent from a year ago and beating analysts forecasts for 70 cents.

EBay Inc. was down 5 per cent after reporting that its profit will be 61 cents to 63 cents in the second quarter on revenues of $3.8-billion to $3.9-billion, below Street forecasts.

Apple Inc. shares were down 1.4 per cent at $396.86, their lowest level since December 2011. They briefly dipped below $400 on Wednesday but closed just above that threshold. Investors are worried about declining demand for its products, especially after a chip supplier Wednesday reported inflated inventories.

European markets found some support overnight from lawmakers in Germany approving participation in the $13-billion (U.S.) bailout of Cyprus. London's FTSE 100 is up 0.4 per cent and Germany's Dax 0.2 per cent.

Asian markets mostly fell overnight, reacting to weak commodity prices, although Chinese stocks edged up after some positive data. Foreign direct investment into China rose 5.65 per cent in March from a year earlier, beating expectations. And home prices in China rose in 68 of 70 cities in March, up from 66 in February - suggesting that if there is a real estate bubble in the country, it's not popping yet.

Japan's Nikkei lost 1.2 per cent while in Shanghai, stocks rose nearly 0.2 per cent.

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