At the open: TSX heads lower

The Toronto stock market moved lower Friday as traders looked ahead to next week's U.S. Federal Reserve meeting and hope the central bank will provide clues as to whether it plans to ease off on some of its economic stimulus.

The S&P/TSX composite index declined 21.45 points to 12,255.68.

The Canadian dollar was down 0.12 of a cent to 98.25 cents US amid a disappointing update on Canadian manufacturing.

Statistics Canada says manufacturing sales fell 2.4 per cent in April to $48.2-billion.

It's the fourth decline in five months and the largest monthly percentage drop since August 2009.

The agency says lower sales in the petroleum and coal product and primary metal industries were largely responsible for the decline.

U.S. indexes were little changed amid a sign of a weakening American manufacturing sector as May industrial production was flat. Economists had expected a 0.3 per cent increase after production fell by 0.5 per cent in April.

The Dow Jones industrials dipped 0.04 of a point to 15,176.04 as traders also took in a consumer confidence reading from the University of Michigan. It came in at 82.7, below Street expectations for 84.5.

The Nasdaq was ahead 1.26 points to 3,446.63 and the S&P 500 index edged up 1.37 points to 1,637.73.

Toronto and New York markets racked up strong, triple-digit advances on Thursday in the wake of positive reports on jobless insurance claims and retail sales, which made up for some of the string of losses that have weighed on markets since late last month.

That's when Fed chairman Ben Bernanke said that the Fed might pull back on its $85-billion-a-month bond-buying program, known as quantitative easing, if economic data improves, especially hiring.

The QE program has underpinned a strong rally on U.S. markets.

The Fed holds its next regularly scheduled meeting on interest rates next Tuesday and Wednesday and wraps up with a news conference by Bernanke.

Thursday's gains were partly fuelled by a Wall Street Journal story that suggested Bernanke will likely use next week's meeting to try to calm market worries that the central bank is in a hurry to moderate its bond purchases.

Financials led TSX decliners, down 0.45 per cent with TD Bank down 50 cents to $81.74.

Telecoms were also down 0.45 per cent and BCE Inc. gave back 41 cents to $44.22.

Speculation about cutting back on the QE program has had the effect of pushing U.S. Treasury yields sharply higher, which in turn has had a negative effect on TSX defensive/interest-rate sensitive sectors such as REITS, utilities, telecom and pipeline stocks.

The industrials sector moved down 0.4 per cent while Canadian Pacific Railway fell $1.04 to $125.53.

Commodity prices were higher with the July crude contract on the New York Mercantile Exchange ahead $1.24 to $97.93 a barrel. The energy sector was off 0.2 per cent The base metals sector was slightly lower as July copper was up a cent to $3.20 a pound. First Quantum Minerals gave back 17 cents to $17.30.

The gold sector was up slightly as August bullion rose $7.20 to US$1,385 an ounce. Iamgold added three cents to $5.38.

Markets have also been weighed down by concerns that the Bank of Japan has done all it is prepared to do to stimulate the Japanese economy.

In April, the Bank of Japan announced a massive stimulus in an attempt to get inflation up to two per cent. The euphoria that drove the Nikkei up to five-year highs has been followed by wild fluctuations. The index is now around 20 per cent down from its May 23 peak, leaving the market in bear market territory.

Tokyo's Nikkei 225, the regional heavyweight, gained 1.9 per cent in Friday trading, recovering some of its losses after Thursday's 6.4 per cent plunge .

China's benchmark Shanghai Composite Index gained 0.6 per cent, coming off its lowest close in six months following Thursday's 2.8 per cent slide. Hong Kong's Hang Seng gained 0.4 per cent and Seoul added 0.4 per cent.

European bourses were positive with London's FTSE 100 index ahead 0.03 per cent, Frankfurt's DAX rose 0.52 per cent and the Paris CAC 40 was up 0.47 per cent.