The Toronto Stock Exchange Broadcast Centre is shown in Toronto on June 28, 2013.Aaron Vincent Elkaim/The Canadian Press
The Toronto stock market was lower Wednesday, weighed down by mining stocks as traders look to the U.S. Federal Reserve and its afternoon announcement on interest rates.
The S&P/TSX composite index fell 38.33 points to 14,860.2 with selling pressure also coming from energy stocks as oil prices continued to fall back.
The Canadian dollar was down 0.12 of a U.S. cent to 78.15 cents.
U.S. indexes were also lower with the Dow Jones industrials down 77.23 points to 17,771.85, the Nasdaq off 5.57 points to 4,931.86 and the S&P 500 index dropping 6.16 points to 2,068.12.
The Fed has assured markets that it would be "patient" in deciding when to raise rates from near zero, where they were set to help recovery from the 2008 financial collapse. But the word is expected to disappear from the Fed's announcement. The central bank is also expected to assure markets that any decision on a rate hike will depend on economic data.
"There's a hypersensitivity right now [about raising rates]," said Craig Jerusalim, portfolio manager at CIBC Asset Management.
"And the fear is this will be the first in a series of increases. That's not my view. My view is that they will wait and see after the first rate hike to see how the economy is handling it. But it's all about the fear and the change and the incremental steps that the Fed is taking."
Meanwhile, the TSX energy sector lost 0.1 per cent as oil prices slid for a seventh day on supply concerns. The April contract in New York fell $1.23 to US$42.23 a barrel after the U.S. Energy Information Administration reported a 10th straight weekly increase in crude supplies that was more than double what analysts expected.
Inventories have been steadily rising to a point where analysts are concerned that storage space could soon be at a premium, which could drive prices down even further. Prices are already down 60 per cent from the highs of last summer amid a global oversupply of crude.
"It's very difficult to get a handle on the short-term (price) bottom," added Jerusalim.
"However, I do have more confidence in higher longer term price because no one is making money at current pricing, which will see a supply response which will ultimately be self correcting."
The base metals component gave back 1.7 per cent while May copper fell five cents to US$2.58 a pound.
The gold sector was off 0.15 per cent as April bullion edged 60 cents lower to US$1,147.60 an ounce.
In earnings news, Power Financial Corp. posted quarterly net income of $506 million or 71 cents per share, down from $593 million or 84 cents per share a year earlier. Power Financial said the year-over-year decline was due to unusual items in both years. Excluding those, operating earnings improved to $525 million or 74 cents per share, from $403 million or 57 cents per share. Power is also is raising its dividend by 6.4 per cent to 37.25 cents per share and its shares dipped 44 cents to $37.28.
"The statement is key," Robert Pavlik, chief investment strategist at Boston Private Wealth. "It's going to not only dictate a possible rate hike sometime this year, perhaps as soon as June, but it's also going to have an influence on possible strength of the U.S. dollar and an influence on the overall market."
Fed officials are assessing the economy and debating the timing of the first interest-rate increase since 2006. They will drop an assurance to be "patient" in considering when to raise rates at the conclusion of a two-day policy meeting Wednesday, according to 89 per cent of economists surveyed by Bloomberg News.
The Fed will release its policy statement at 2 p.m. EDT in Washington, and Chair Janet Yellen speaks to the press at 2:30 p.m.
Speculation that a strengthening labour market is pushing the central bank closer to a rate increase has weighed on U.S. equities, making them among the worst-performing developed markets this year. Fed stimulus has helped spur a six-year bull market that made the S&P 500 more than triple since a low in in 2009.
Fed-funds futures trading in the U.S. showed a 54 per cent chance the Fed will raise its benchmark rate to at least 0.5 per cent by September, according to data compiled by Bloomberg. That was down from 59 per cent odds on March 6, when data showed better-than-forecast hiring pushed the unemployment rate to the lowest in almost seven years.
Anticipation of higher interest rates helped boost the dollar to a 10-year high last week against a basket of 10 major currencies. The S&P 500 has lost 2.3 per cent from its March 2 record as concern mounts that the surging U.S. currency will hurt corporate earnings.
Recent weaker than-expected U.S. economic data could temper the outlook for higher rates. The Bloomberg ECO U.S. Surprise Index, which measures whether data beat or missed forecasts, has dropped to a six-year low.
The percentage of global money managers who own fewer American equities than represented in global benchmarks is the highest since 2008, a survey by Bank of America Corp. showed. Clients of exchange-traded funds have pulled about $14-billion from U.S. stocks this quarter while adding $29-billion to international shares, data compiled by Bloomberg show.
The proportion of investors in Bank of America's survey saying U.S. equities are overvalued has reached its highest since May 2000 at a net 23 per cent.
Eight of 10 main industries in the S&P 500 declined on Wednesday. Consumer shares dropped more than 0.6 per cent. Coca- Cola Co., United Technologies Corp. and Visa Inc. decreased more than 1.4 per cent for the biggest losses in the Dow.
Utilities stocks climbed 0.6 per cent as yields on 10-year U.S. Treasuries fell to the lowest since Feb. 27. The shares have one of the highest payouts among S&P 500 groups with a dividend yield of 3.6 per cent. Energy companies rose 0.3 per cent while crude oil dropped to a six-year low amid its longest losing streak since October.
Adobe Systems Inc. slipped 3 per cent after the company reported lower-than-expected subscription growth for its cloud service and forecast earnings and revenue below analysts' estimates.
FedEx Corp. fell 2.7 per cent after narrowing its full-year profit forecast as a strong holiday shipping season was offset by unfavorable currency exchange rates. Quarterly profit topped analysts' average estimates.
Kraft Foods Group Inc. dropped 1.7 per cent. The company is recalling more than 6.5 million boxes of its signature macaroni and cheese after customers reported finding small pieces of metal inside.
Oracle Corp. added 2.4 per cent after raising its dividend. The company said revenue excluding the effect of a strong dollar rose 6 per cent in the third quarter.
With files from Bloomberg News