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The close: Dow, TSX hit by commodity producers, financials

Stocks fell on Tuesday, even as they recovered some lost ground in late afternoon trading, after the Federal Reserve suggested it is in no rush to implement another round of monetary policy stimulus.

The Dow Jones industrial average closed at 13,199.55, down 64.94 points or 0.5 per cent – recovery from a dip of more than 130 points earlier. The broader S&P 500 closed at 1413.31, down 5.73 points or 0.4 per cent. In Canada, the S&P/TSX composite index closed at 12,323.61, down 183.45 points or 1.5 per cent.

Stocks had been weak throughout the day, with declines early on driven by a grumpy-sounding Chinese central bank governor, who warned that the world continues to face the risk of a global recession. As well, rising bond yields in Italy, Portugal and Spain reflected a flare-up of concerns about their ability to rein in their deficits and avoid a financial crisis.

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However, the release of Fed minutes from its last monetary policy meeting seemed to really roil markets, sending gold down, bond yields up and rattling equity markets. While the central bank sounded cautious about the U.S. economy, it gave little indication that it is considering another round of stimulus – surprising some investors who had been expecting the Fed to give the economy another jolt.

Energy producers, materials stocks and financials were the worst hit sectors in both Canada and the United States. Royal Bank of Canada fell 2.8 per cent – largely a reaction to a U.S. regulator that sued the bank on Monday afternoon over alleged illegal futures trading activity. However, RBC also said it would pay $1.1-billion to buy the rest of Dexia that it does not already own.

Other financials were also weak, though. In Canada, Toronto-Dominion Bank fell 0.9 per cent. In the U.S., Bank of America Corp. fell 2 per cent and JPMorgan Chase & Co. fell 1.5 per cent.

Commodities dragged down commodity producers. Crude oil fell to $104.01 (U.S.) a barrel, down $1.22. Among energy stocks, Suncor Energy Inc. fell 1.4 per cent and Chevron Corp. fell 1.1 per cent. Gold producers were hit even harder, in reaction to diminishing expectations for Fed monetary stimulus: Barrick Gold Corp. fell 3 per cent and Goldcorp Inc. fell 5.8 per cent.

Meanwhile, Research In Motion Ltd. fell 9.4 per cent, potentially on dwindling hopes that the BlackBerry maker is appealing to a buyer. However, home improvement retailer Rona Inc. surged 12.4 per cent after the chief financial officer of Lowe's Cos. said the company is open to "all options" if Rona put itself up for sale.

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About the Author
Investing Reporter

David Berman has been writing about business and investing since 1995. He has written for a number of magazines, including Canadian Business and MoneySense. He worked at the Financial Post as an investing writer and daily columnist before moving to the Globe and Mail in 2008. More

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