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The entrance for National Bank on the corner of York St. and Adelaide St. West in Toronto's Financial district. (Charla Jones/The Globe and Mail)
The entrance for National Bank on the corner of York St. and Adelaide St. West in Toronto's Financial district. (Charla Jones/The Globe and Mail)

At midday: TSX down, National Bank up Add to ...

The Toronto stock market was lower Wednesday, weighed down in part by the TSX financial sector even as traders took in positive earnings from National Bank (TSX:NA).

But the Canadian dollar fell to fresh, multi-year lows as the Bank of Canada’s rate announcement left markets with the impression that interest rate hikes are still a long way off.

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The loonie was off the worst levels of the session, down 0.36 of a cent to 93.55 cents US, after the bank left its key rate unchanged at one per cent, where it has been since September 2010. Earlier, the loonie hit 93.47 cents US, its lowest level since May 2010.

The S&P/TSX composite index lost 34.83 points to 13,285.04.

National Bank shares rose 91 cents to $91.81 after it posted $337 million in quarterly net income, adding up to a full-year profit of $1.554 billion. Ex-items, the bank had $370 million of adjusted net income, or $2.09 per share, up eight per cent from $1.93 per share a year earlier, which met expectations. National Bank is also upping its quarterly cash dividend by six per cent to 93 cents and also announced plans for a two-for-one stock split.

U.S. indexes were higher as traders balanced positive economic data with concerns about the Federal Reserve cutting back on economic and the Dow Jones industrials gained 28.45 points to 15,943.07, the Nasdaq was ahead 9.43 points to 4,046.63, while the S&P 500 index was up 3.45 points at 1,798.6.

There was positive news on the employment front two days before the release of the U.S. government’s employment report.

Payroll firm ADP reported that the American private sector created 215,000 jobs during November. Economists have been forecasting that the government report would show that the economy cranked out a total of 183,000 jobs during the month.

While the data is another sign of an improving economy, analysts believe a report showing continuing, steady employment gains could persuade the Federal Reserve that it’s time to start cutting back on its US$85 billion of monthly bond purchases.

The Fed’s stimulus has supported a strong performance on global stock markets over the past few years. But tapering those asset purchases could work the opposite way, even though it would mean that the U.S. economy is improving.

Stock investors should welcome the end of the stimulus because it shows the economy is strengthening, said Doug Cote, chief market strategist at ING Investment Management.

“Ultimately, it’s a good thing,” said Cote.

“It means the economy is standing on its own two feet.”

Other data showed that sales of new homes grew 25.4 percent to a seasonally adjusted annual rate of 444,000 in October, the largest monthly percentage increase since May 1980.

And the U.S. trade gap narrowed to $40.6 billion in October, helped by America’s energy boom that lifted exports to an all-time high.

Financials weighed on the TSX for a second day as investors lower expectations ahead of earnings coming out this week from the rest of the big banks. Bank of Montreal (TSX:BMO) shares fell 4.5 per cent Monday even as earnings beat expectations. Investors were disappointed with, among other things, weakness in its U.S. operations. BMO shares were down 29 cents to C$69.96 Wednesday while Royal Bank (TSX:RY) dropped 56 cents to $698.

However, the financial sector has been a star performer on the TSX this year, up over 20 per cent year to date prior to the release of BMO’s earnings on Monday.

The tech sector was also negative with CGI Group (TSX:GIB.A) down $1.35 to $37.17.

The interest rate sensitive utilities sector dropped as U.S. bond yields advanced in the wake of the positive economic data with the benchmark U.S. 10-year Treasury climbed to 2.83 per cent from 2.78 per cent, its highest level in more than two months.

Atlantic Power (TSX:ATP) lost seven cents to $3.49.

Metal prices improved following the U.S. jobs data with March copper ahead six cents to US$3.23 a pound. The base metals component was little changed but Teck Resources (TSX:TCK.B) advanced 29 cents to $25.53.

The energy sector was down 0.4 per cent as the January crude contract on the New York Mercantile Exchange gained 69 cents to US$96.73 a barrel, while the latest data showed a drop in U.S. supplies. The Energy Information Administration said that crude supplies fell by 5.6 million barrels last week, much bigger than the decline of 1.25 barrels that analysts had looked for.

The gold group gained 0.65 per cent while February bullion rose $5.70 to US$1,226.50 an ounce. Goldcorp (TSX:G) climbed 26 cents to C$22.51.

In other corporate developments, Air Canada (TSX:AC.B) rose nine cents to $7.82 after an analyst at BMO increased the price target for the carrier’s shares to $10 from $7.50. Air Canada’s share price has skyrocketed during this 2013 from a 52-week low of $1.59.

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