TORONTO - The Toronto stock market closed sharply lower Thursday after cautious words from the U.S. Federal Reserve and mixed economic data deepened pessimism about the economic rebound in the world's biggest economy.
The S&P/TSX composite index lost 137.32 points to 11,670.18 on lower than usual volume with many market participants taking the week off as preparations for the G20 summit converted the financial district into a tightly controlled security zone.
The TSX Venture Exchange moved 4.14 points lower to 1,451.75.
The Canadian dollar was down 0.49 of a cent to 95.81 cents US.
The Fed suggested Wednesday that the U.S. economic recovery is uneven and vulnerable to turmoil in the markets. The U.S. central bank made the comment as it also left its key interest rate at an historic low of zero to 0.25 per cent to push the economy out of recession.
The Fed assessment came on the same day that data was released showing that new home sales dropped by 33 per cent to a record low last month.
Meanwhile, on Thursday reports on jobless insurance claims and durable goods orders painted a mixed picture of the economy.
Financials were the weakest sector on Thursday, down 1.2 per cent as finance minister Jim Flaherty said countries calling for a global bank tax are not focusing on the most fundamental issues in worldwide financial reform.
He said Thursday that there won't be such a tax imposed during the G20 summit because the majority of the countries in the group didn't want it.
CIBC (TSX:CM) lost $1.96 to $72.35 while Bank of Montreal (TSX:BMO) gave back $1.44 to $60.32 .
Manulife Financial's chief executive says the company is interested in picking up the Asian life insurance unit of U.S. insurer AIG. The comment from Don Guloien comes after the collapse of a US$35.5-billion deal for Prudential PLC to take over American International Assurance Ltd.
He added that "people can be comfortable, though, that we would not be approaching that deal at any price approaching $35.5 billion." Manulife shares were off 14 cents at $16.26.
The TSX energy sector fell 1.72 per cent as the August crude contract on the New York Mercantile Exchange rose 16 cents to US$76.51 barrel. Prices were further depressed by a report from the Energy Information Administration on Wednesday that U.S. oil supplies increased by two million barrels last week, while analysts were expecting stockpiles to drop. Suncor Energy (TSX:SU) stepped back 74 cents to C$33.30 while Imperial Oil (TSX:IMO) lost 70 cents to $40.43.
The gold sector was little changed with the August bullion contract on the Nymex up $11.10 to US$1,245.90 an ounce.
The base metals sector was down almost three per cent even as the July copper contract was up seven cents to US$3.01 a pound. HudBay Minerals (TSX:HBM) fell 60 cents to C$12.16 as the acting chief executive of the zinc and copper miner told shareholders the company plans to expand its operations beyond its Manitoba base.
Teck Resources (TSX:TCK.B) lost $1.18 to $34.49.
New York markets were also lower as initial jobless insurance claims fell to 457,000, slightly better than the 460,000 predicted by economists. However, claims are still above levels that would indicate employers are ramping up hiring.
Durable goods orders fell 1.1 per cent last month, but the drop was due to a decline in volatile transportation orders. Economists forecast a drop of 1.3 per cent.
Excluding transportation, orders rose 0.9 per cent.
The Dow Jones industrial average fell 145.64 points to 10,152.8.
The Nasdaq composite index dropped 36.81 points to 2,217.42 while the S&P 500 index was down 18.35 points to 1,073.69.
The TSX is on its way to a losing week after two positive weeks in a row on rising feeling that the economic recovery isn't turning out as robust as hoped.
"The numbers were favourable, obviously durable goods orders looking good and also the fact that we had the jobless claims numbers going back down," said Andrew Pyle, investment adviser at ScotiaMcLeod in Peterborough, Ont.
"I think that was positive for the market but not positive enough to kind of counter this, `is growth slipping away' kind of mentality and that's where we are right now."
In other corporate news, Magna International Inc. (TSX:MG.A) shares were ahead 56 cents to $73. The Ontario Securities Commission said Thursday that it would deliver a ruling after the markets close about whether a proposal that would see founder Frank Stronach receive hundreds of millions of dollars to give up his voting control of the company can go ahead. Magna said Thursday that holders representing 57.4 per cent of its total outstanding shares have voted to approve the controversial plan.
Goldcorp Inc. of Vancouver (TSX:G) says there's "no basis" for closing its Marlin mine while the Guatemalan government conducts what it calls an "administrative process" to deal with allegations that the rights of local people have been violated. The Vancouver-based miner says the Guatemalan government agrees that studies by several of its ministries have found no evidence the mine has contaminated the water supply or caused disease. Its shares lost 32 cents to $46.09.
Colossus Minerals Inc. (TSX:CSI) shares jumped 69 cents to $7.96 after it said it has discovered two new mineralized zones at its Serra Pelada joint venture property in Brazil, where the Toronto-based company is exploring for gold, platinum and palladium.
In Asia, economic news on Thursday was relatively more upbeat -- with Japan reporting continued growth in exports for May, driven by demand from within the region. Exports rose for a sixth straight month as brisk global demand for cars and high-tech products helped shore up a recovery in the world's second-largest economy.
