An unexpected leap in U.S. jobless claims for last week zapped earlier enthusiasm for stocks and other economically sensitive assets this morning, sending the TSX lower at the open.
While U.S. major indexes were modestly positive, the Canadian benchmark index dipped into the red, adding to its 259-point loss on Wednesday, as selling pressure in materials stocks - and especially energy - resurfaced.
The U.S. reported that new jobless claims last week rose 28,000 to a four-month high of 385,000, higher than the 350,000 economists had forecast. When added to Wednesday's disappointing read on private payrolls, traders are increasingly getting worried about what Friday's critical non-farm payrolls report will say. Signs of a slowing recovery in the U.S. economy could be the ticket for a market correction after the S&P 500's 10 per cent rally this year.
At a few minutes before 11 a.m. (ET), the S&P/TSX composite index was down 48 points, or 0.3 per cent, at 12,373; the S&P 500 was up 4 points, or 0.2 per cent, at 1,558; and the Dow Jones industrial average was up 37 points, or 0.2 per cent, at 14,587.
Selling pressure in commodities was picking up as the morning progressed. The active May crude oil futures contract in New York was down $1.61, or 1.6 per cent, at $92.90 (U.S.) per barrel, copper was down 0.2 per cent at $3.33 per pound, and gold was down $6, or 0.4 per cent, at $1,547.50 per ounce for the active June contract.
Energy was the top declining subsector of the TSX, down 1.02 per cent. Suncor was down 1.5 per cent.
Wednesday's hefty 259-point loss for the TSX, as well as a 1 per cent dip in the S&P 500 index and a slide in most major commodities, was ignited in part by disappointing data on ADP private payroll gains and a U.S. non-manufacturing index. But those reports rarely spark such a sharp market reaction, and suggest traders' nervousness over how much longer this year's powerful rally in U.S. stocks can continue may be more to blame. This morning's initial jobless claims fed into those fears.
Just how much longer the Federal Reserve's quantitative easing measures will last is also going to increasingly come up for debate after San Francisco Fed President John Williams caught the market off guard Wednesday by saying that the central bank could begin curtailing its $85-billion-a-month asset buying program by this summer if the labour market continues to show improvement.
It was one of the clearest dates put forward so far on when the Fed's measures will come to an end, though investors are largely shrugging it off for now, perhaps waiting for more definitive words from chairman Ben Bernanke. On CNBC this morning, Atlanta Fed President Dennis Lockhard provided some more hints, suggesting that a few more months of solid economic data and improved jobs figures will be needed before monetary policy can be tightened.
Japan overnight ramped up its own quantitative easing measures, with its central bank announcing a policy overhaul intended to double the money supply and achieve a 2 per cent inflation target. Such action was largely expected under the country's new political regime and central bank governor Haruhiko Kuroda, but still came somewhat as a relief, sending the Nikkei surging 2.2 per cent and the yen falling against the greenback.
There's lots of monetary policy action happening in Europe this morning as well. The Bank of England announced it is leaving its key interest rate, and asset-buying program, unchanged. The European Central Bank did the same, and its president, Mario Draghi, offered some hopes for a further economic recovery in the second half of this year as he spoke at a news conference.
Here's a look at some stocks moving on early news:
Facebook Inc. today holds an event to show the world its "new home on Android." It's rumoured they may announce a deeper push into smartphones with a modified version of the Google software. Shares are up 1.4 per cent.
Bank of America downgraded Microsoft to "neutral" from "buy," and cut its price target to $33 from $35, citing disappointment with sales of Windows 8. Shares are down 0.6 per cent.
Transat A.T. Inc. announced a revamp of its flights, which includes adding Boeing 737s to its fleet for the first time.
TD Bank's holds annual general meeting. It will be its first public appearance by new CEO-designate Bharat Masrani.