TORONTO - The Toronto stock market closed lower for a second day, as investors continued to take profits Tuesday from a seven-week-old spring rally.
New York markets closed little changed as the release of a much better than expected reading of U.S. consumer confidence helped investors deal with fresh concerns about banks.
"I think these events that come out of left field (such as) swine flu are unfortunate, they cannot be priced and I do not think investors should act or modify their behaviour or base any decision on those factors," said Vincent Delisle, portfolio strategist at Scotia Capital in Montreal.
"The sustainability of this rally will depend on the U.S. economic data coming in and it needs to come in better than expected -- and that's precisely what we got this morning with the U.S. consumer confidence numbers, which were very, very positive."
Toronto's S&P/TSX composite index lost 46.77 points to 9,348.03 dragged down by oil stocks as crude prices remained under pressure on concerns that the spread of swine flu could cut demand for fuel.
The TSX Venture Exchange was 9.88 points lower to 993.1 while the Canadian dollar was down 0.07 of a cent to 81.93 cents U.S.
New York's Dow Jones industrial average slipped 8.05 points to 8,016.95.
The Nasdaq composite index was off 5.6 points to 1,673.81 while the S&P 500 index edged 2.35 points lower to 855.16 after the U.S. Conference Board said that its Consumer Confidence Index rose 12 points to 39.2. The reading marks the highest point since November and well surpasses economists' expectations for a level of 29.5.
The Expectations Index, which measures how shoppers feel about the economy over the next six months, skyrocketed to 49.5 from 30.2 in March.
"This is yet another indicator suggesting that some sort of bottom may have possibly formed in the economy," said BMO Capital Markets senior economist Jennifer Lee.
"Well, at least prior to the latest blow -- swine flu -- and that will be another test of everyone's will."
The World Health Organization raised its alert on swine flu to Phase 4, meaning there is sustained human-to-human transmission of the virus causing outbreaks in at least one country.
There has been concern that the spread of the disease could escalate to a full-blown pandemic and derail the economic rally, which has been based on hopes the worst of the economic damage from the recession is already factored in.
However, analysts point out that the market was already vulnerable after a string of gains that have taken the TSX up about 24 per cent since March 10.
"Swine flu or not... this market will look for reasons to pull back, modestly," Delisle said.
"But if we get some numbers like we do today, the attention will quickly go away from the pandemic to how the U.S. is faring."
Banking troubles came back into the spotlight after news came out that regulators told Bank of America Corp. and Citigroup Inc. that they may need to raise more capital unless they can convince regulators that results of government "stress tests" were mistaken.
Citigroup shares fell 18 cents to US$2.89 while Bank of America (TSX:BAC) declined 77 cents to US$8.15.
The TSX financial group moved up 0.2 per cent with CIBC (TSX:CM) ahead 65 cents to $53.65.
Oil prices had earlier fell sharply amid the swine flu concerns as investors worried about lower demand. But losses were pared sharply mid-afternoon and the June contract on the New York Mercantile Exchange closed down 22 cents at US$49.92 a barrel after going as low as US$48.55.
The TSX energy sector was down 1.2 per cent amid earnings reports from two oilpatch heavyweights.
Petro-Canada (TSX:PCA) reported a quarterly loss of $47 million, which marked a sharp reversal from a profit of $1.08 billion during the same quarter the year before and its shares were up seven cents to $37.65.
Nexen Inc. (TSX:NXY) shares slipped 19 cents to $22.84 as it reported net income of $135 million for the quarter, down sharply from year-earlier profit of $630 million. Quarterly revenue fell to $1.31 billion from year-earlier levels of $2.09 billion.
Shares in UTS Energy Corp. (TSX:UTS) fell six cents to $1.52 after French oil giant Total SA dropped its bid to take over the Canadian oilsands player. UTS, a partner in the Fort Hills oilsands project in Alberta had earlier rejected Total's $830 million offer as inadequate.
The June bullion contract on the Nymex moved down $14.60 to US$893.60 an ounce, taking the gold sector down 2.4 per cent. Barrick Gold Corp. (TSX:ABX) fell $1.08 to $35.60.
There was also some positive news from the retail sector.
Shoppers Drug Mart Corp. (TSX:SC) shares rose 69 cents to $44.84 as the company overcame both an ailing economy and a later Easter shopping season to post a six per cent increase in its first-quarter profits.
And shares in sporting goods retailer Forzani Group Ltd. (TSX:FGL) gained 18 cents to $12.24 after it said it plans to increase its sales by 10 per cent a year over five years by reducing its banner count and expanding its Sport Chek outlets.