The Toronto stock market was lower Thursday as traders hope that the U.S. Federal Reserve will deliver another round of stimulus to help lift a struggling economy.
The S&P/TSX composite index declined 31.72 points to 12,200.9 while the TSX Venture Exchange added 0.5 of a point to 1,283.14.
However, traders are also cautious, realizing that the Fed may not want to launch another round of quantitative easing, which would see the central bank print more money to buy up bonds, with the U.S. election less than two months away.
The Fed may also believe that while the U.S. economy remains weak, it is still growing and conditions don't warrant more assistance.
"Investors remain split in their expectations of quantitative easing, so the decision can potentially lead to sharp market moves," said a commentary from Barclays Research.
The Canadian dollar inched up 0.03 of a cent to 102.43 cents (U.S.).
The loonie has surged in value against the U.S. dollar since last week after European Central Bank president Mario Draghi announced the ECB would buy government bonds to hold borrowing costs down the most vulnerable eurozone members. And the greenback further weakened over the last week as speculation grew the Fed was prepared to launch a third round of stimulus, particularly after August job creation figures disappointed even modest expectations.
New York markets also stepped back with the Dow Jones industrials down 6.42 points to 13,326.93.
The Nasdaq composite index added 1.03 points to 3,115.34, and the S&P 500 index dipped 0.88 of a point to 1,435.68.
The U.S. central bank ends its two-day meeting on interest rates later today and will release its statement at 12:30 p.m. EDT. That will be followed by a news conference with Fed chairman Ben Bernanke at 2 p.m.
The most optimistic scenario for investors would be a third round of purchases of Treasurys and mortgage-backed securities to keep interest rates low, encourage lending and support the slow recovery of the housing sector. In two previous bond-buying programs, the Fed bought more than $2-trillion of Treasurys and mortgage-backed securities after the 2008 financial crisis.
One median estimate suggested the Fed would target a further $500-billion this time around.
Economists also expect that the Fed will commit to keeping rates near zero until mid-2015.
Commodity prices were mixed with oil prices moving above the $98 a barrel Thursday after attacks on U.S. diplomatic missions and the killing of the U.S. ambassador to Libya sparked new worries about unrest in the Middle East.
The October crude contract on the New York Mercantile Exchange was ahead $1.41 to $98.42 a barrel and the energy sector was slightly higher. Cenovus Energy gained 26 cents to $34.35.
But most TSX sectors were in the red.
The gold sector led TSX decliners, down one per cent as December bullion gained $2.20 to $1,735.90 an ounce. NovaGold Resources was off a dime to $4.96.
The base metals sector shed 0.86 per cent with December copper unchanged at US$3.69 a pound. Teck Resources gave back 32 cents to $30.30.
In corporate news, shares in travel company Transat AT Inc. surged 67 cents or 16.79 per cent to $4.66 as it reported quarterly profit of $9.4-million or 25 cents a share, compared to a year ago loss of $2.8-million. Revenue was down three per cent from a year earlier to $909.1-million.
Empire Company Ltd. says its first-quarter profit rose to $108.9-million or $1.60 per share, up from $89.2 million or $1.31 per share a year earlier. The Nova Scotia-based company is best known for its Sobeys grocery stores but it also is involved in other retail operations, movie theatres and real estate. Revenue for the company was up 9.7 per cent to $4.56-billion, thanks in part to the acquisition of 236 retail gas locations and convenience stores and its shares gained 92 cents to $58.50.
The U.S. Department of Justice is asking satellite technology company MacDonald, Dettwiler and Associates Ltd. to shed some more light on its $875-million takeover bid for California-based Space Systems/Loral Inc. The deal, which the company has called "a game changer" will boost MacDonald, Dettwiler's role as a supplier of commercial communications satellites. MacDonald, Dettwiler shares lost $3.02 or 5.6 per cent to $50.80 on top of a seven per cent slide on Wednesday.
A New Jersey court has dismissed a lawsuit filed by Fairfax Financial Holdings Ltd. that accused a group of hedge funds of conspiring with financial analysts to drive down its share price. New Jersey Superior Court Judge Donald Coburn dismissed the Toronto-based insurance and financial services company's case with prejudice, preventing similar claims in the future, but without costs, on Wednesday. Fairfax said it would appeal the decision and its shares were unchanged at $369.