The Toronto stock market closed lower Tuesday amid concerns that the U.S. stock rally may be running out of steam and a new report predicting slower-than-anticipated global economic growth.
The S&P/TSX composite index ticked 15.46 points lower to 13,442.6 while the Canadian dollar fell 0.36 of a cent to 95.5 cents US.
The Organization for Economic Co-operation and Development cut its 2014 forecast for global growth from four per cent to 3.6 per cent. The OECD cited U.S. fiscal uncertainty, the impact of the Federal Reserve tapering its asset purchases and weakness in emerging markets.
U.S. markets were lower after indexes backed off Monday after hitting key technical levels, raising questions about whether American markets are due for their first serious retracement in two years.
The Dow Jones industrials declined 8.99 points to 15,967.03, the Nasdaq fell 17.51 points to 3,931.55 and the S&P 500 index slipped 3.66 points to 1,787.87.
Investors remained cautious a day after the Dow broke 16,000 and the S&P breached the 1,800 mark – both for the first time. The Dow alone has surged more than 20 per cent this year and is up about 900 points since early October amid optimism that the Federal Reserve won't be moving to cut back on its monthly US$85-billion of bond purchases until well into the new year.
"You always have to be cautious when the market has gone up as fast as it has," said Ian Nakamoto, director of research at 3MACS.
"(But) any correction that could happen I would use it to buy the dips because valuations are still reasonable."
The TSX is up about 8.5 per cent for the year so far, held back by the mining sector. Most other sectors have put in solid performances, particularly financials, energy companies and industrials – companies Nakamoto thinks will likely take the TSX higher.
"Much more of the direction of the TSX is going to be the financial and energy components because we have had such a correction in the mining sectors," he observed.
Commodity prices advanced and the energy sector was up 0.43 per cent as December crude on the Nymex moved up 31 cents to US$93.34 a barrel. Bankers Petroleum (TSX:BNK) ran up 13 cents to C$3.86.
Niko Resources (TSX:NKO) surged 23.6 per cent to $1.78, recovering for a second day after plunging more than 50 per cent Friday after it said that it had secured a "very high cost," $340-million loan to avoid defaulting on debt payments and other obligations.
The gold sector was up about 0.55 per cent while December bullion climbed $1.20 to US$1,273.50 an ounce. The sector has been a major drag this year, plunging about 45 per cent as global inflation remains very low while economic conditions are gradually improving, making bullion less attractive as a hedge. Kinross Gold (TSX:K) advanced seven cents to C$5.18.
The consumer sector was in focus Tuesday as Sears Canada Inc. (TSX:SCC) stock jumped $1.07 or 6.37 per cent to $17.87 as the retailer said that it will pay its shareholders an extraordinary dividend of $5 per share. Sears also posted a quarterly net loss of $48.8-million or 48 cents per share, mainly due to severance and restructuring costs.
Food company George Weston (TSX:WN) posted earnings ex-items of $1.38 a share, seven cents shy of estimates. Its shares declined six cents to $80.85 as the company also said overall sales rose 2.1 per cent to $10.38-billion.
The base metals sector weighed on the Toronto market, down 0.02 per cent as December copper edged up one cent to US$3.16 a pound. First Quantum Minerals (TSX:FM) fell 30 cents to C$18.55.
In the U.S., Home Depot Inc. reported net income of US$1.35-billion, or 95 cents per share, up from $947-million, or 63 cents per share, a year ago. Analysts expected earnings of 89 cents per share. Revenue rose seven per cent to $19.47-billion from $18.13-billion. Wall Street had predicted $19.18-billion. Its shares gained 71 cents to $80.38.
Shares in electric car maker Tesla (Nasdaq:TSLA) ran ahead $4.51 to $126.09 even as the U.S. government's auto safety watchdog opened an investigation into battery fires in its Model S electric cars. The probe affects more than 13,000 cars from the 2013 model year that were sold in the U.S. Tesla has sold about 19,000 of the cars worldwide.
Traders are looking to the release Wednesday of the minutes from the latest Fed meeting held late last month for hints about when the central bank might start cutting back on its asset purchases, which have kept bond yields low and encouraged people to buy equities.