Although Canada would be a big beneficiary of resurgence in U.S. growth, the domestic equity market – still 36 per cent materials and energy stocks – would be hurt by declining resource demand in the emerging markets, according to Goldman’s 2014 outlook .Frank Gunn/The Canadian Press
The Toronto stock market was lower for a second day amid growing expectations that the U.S. Federal Reserve will start cutting back on its monetary stimulus program as early as next week.
Further drops in mining stocks heped push the S&P/TSX composite index down 55.99 points to 13,077.43 after tumbling 191 points.
Traders also digested a major disappointment from yoga clothing retailer Lululemon Athletica (Nasdaq:LULU). Its stock fell 7.5 per cent to US$63.22 in New York after the Vancouver-based company said quarterly profit came in at US$66.1 million, or 45 cents per diluted share, four cents ahead of forecasts. Revenues climbed to $379.9 million from $316.5 million for the quarter, above the $374.6 million analysts expected. However, it expects flat same store sales in the crucial fourth quarter.
The Canadian dollar declined 0.18 of a cent to 94.22 cents US as the U.S. dollar improved in the wake of a stronger than expected retail sales report.
Fed concerns were responsible for a 191-point tumble on the TSX Wednesday while the Dow industrials dropped 130 points.
U.S. indexes were mixed after the Commerce Department said that retail sales rose 0.7 per cent in November, the biggest gain in five months and a better showing than the 0.6 per cent rise that economists had expected. October's figure was also revised higher to 0.6 per cent from 0.4 per cent.
The Dow Jones industrials were down 22.06 points to 15,821.47, the Nasdaq gained 8.39 points to 4,012.21 and the S&P 500 index added 0.38 of a point to 1,782.6.
A budget deal in the U.S. Congress raised concerns that the Fed is set to start tapering its US$85 billion of monthly bond purchases.
The budget agreement restores about $63 billion in across-the-board automatic spending cuts and would help prevent another partial shutdown of the U.S. government. Analysts believe the prospect of a shutdown over budget wrangling, along with difficulties in extending the debt ceiling, helped persuade the Fed to postpone tapering in September.
The 16-day shutdown in October crimped economic growth and hurt consumer confidence.
The prospect of Fed tapering has hung over markets since May when outgoing Fed chairman Ben Bernanke first raised the prospect of cutting back on asset purchases, if economic conditions allowed.
Those bond purchases have kept long-term rates low, persuaded investors to put their money in the stock market and supported a strong rally on many markets this year.
Fed tapering concerns also continued to punish bullion prices as February gold fell $26.90 to US$1,230.30 an ounce.
Bullion prices have also been depressed amid low inflation in many countries and an improving global economy, falling about 25 per cent this year. Gold stocks have done much worse, with the TSX Global Gold sector down about 50 per cent for the year.
That sector was down a further two per cent Thursday morning with Goldcorp (TSX:G) down 39 cents to $22.03.
On Wednesday after the close, Iamgold Corp. (TSX:IMG) said that it is suspending its dividend effective immediately, citing the need to preserve cash in the face of falling prices for bullion. Prior to the announcement, Iamgold paid a semi-annual dividend of 12.5 cents US per share. Iamgold is a mid-tier mining company with six operating gold mines, including joint ventures in Canada, South America and Africa.
The base metals sector lost 1.4 per cent while March copper was up one cent at US$3.30 a pound. Teck Resources (TSX:TCK.B) fell 54 cents to $24.13.
Financials were also weak with Scotiabank (TSX:BNS) down 36 cents to $62.82.
The energy sector was flat as January crude on the New York Mercantile Exchange gained 56 cents to US$98 a barrel.
In other corporate news, Air Canada (TSX:AC.B) is buying 61 Boeing 737s as it replaces its older Airbus and Embraer narrow body aircraft. The deal has a face value of about US$6.5 billion. Air Canada says it could expand the order to as many as 109 of Boeing's 737 MAX planes as it replaces its older Airbus and Embraer narrow body aircraft. Air Canada stock rose a penny to $7.69.
Canadian utility Fortis is buying power provider UNS Energy Corp. for $2.5 billion, expanding its business into Arizona. Fortis will also assume $1.8 billion in debt. UNS Energy, which is headquartered in Tucson, Ariz., provides electricity and natural gas services to more than 650,000 customers in the state through its two subsidiaries. Fortis shares fell $1.20 to $29.99.
European bourses were also in the red with London's FTSE 100 index down 0.95 per cent, Frankfurt's DAX declined 0.75 per cent and the Paris CAC 40 lost 0.2 per cent.