The Toronto stock market snapped a five-session winning streak Thursday, pulled lower by a sharp drop in base metal and gold stocks.
"We have some profit taking," said Fred Ketchen, manager of equity trading at Scotia Capital. "This market is in a state where it needs to be relaxed for a bit."
The S&P/TSX composite index lost 27.37 points to 11,528.23 near the end of a strong trading week in which optimism about economic recovery had sent the main TSX index running ahead to its highest close in almost a year on Wednesday.
"I think it is probably justified, I think there is growing enthusiasm because there's growing confidence," added Mr. Ketchen.
The TSX base metals sector fell 3.98 per cent as the December copper contract declined 4.05 cents (U.S.) to $2.896 a pound.
The gold sector was also a major decliner, down 2.25 per cent as December gold on the New York Mercantile Exchange gave back $6.70 to $1013.50 an ounce.
The TSX Venture Exchange declined 11.8 points to 1,272.74.
Stock markets in Canada and the United States are up smartly this week after Federal Reserve Chairman Ben Bernanke said that the U.S. recession was likely over and a report on Wednesday showed industrial activity surged 0.8 per cent in August, better than the 0.6 per cent increase economists had forecast.
The Canadian dollar closed 0.17 of a cent lower to 93.74 cents after a report showing that consumer prices in Canada declined in August for the third consecutive month and other data indicating a Canadian economic recovery is on the way.
Statistics Canada reported that the annual rate of inflation was negative 0.8 per cent last month, as the relatively low cost of gasoline and energy continued to drag the consumer price index down.
That compared with the July reading of minus 0.9 per cent, which was Canada's lowest inflation rate in 56 years.
The agency also said that its composite leading index, designed to indicate where the economy is headed in the next six to 12 months, rose 1.1 per cent in August, the biggest jump since April, 2002.
The agency said jumps of 1 per cent or more in the index usually come early in a recovery that follows a downturn.
The TSX energy sector was down 0.4 per cent with the October crude contract on the Nymex down 4 cents at $72.47 a barrel. Crude oil had surged about $4 a barrel over the last three sessions amid signs the U.S. economy, the world's largest consumer of crude, has stopped shrinking. In turn, the rise has sent the TSX energy sector up well over 3 per cent this week.
New York markets were little changed amid some earnings disappointments and positive economic data.
The Dow Jones industrial average was down 7.79 points to 9,783.92.
The Nasdaq composite index fell 6.4 points to 2,126.75 while the S&P 500 index was off 3.27 points to 1,065.49 as the U.S. Commerce Department said that construction of new homes and apartments rose 1.5 per cent to an annual rate of 598,000 units last month, slightly lower than the 600,000-unit pace that economists had forecast. But it was still the highest level in nine months.
There was also an indication that job cuts are slowing as the U.S. Labour Department said that the number of newly laid-off workers seeking unemployment benefits fell last week to the lowest level since early July.