North American markets close solidly lower; loonie down against U.S. dollar

TORONTO – North American markets closed solidly in the red Thursday amid weak earnings reports on both sides of the border.

The S&P/TSX composite was down 122.82 points at 15,224.52, while the loonie was down 0.28 of a U.S. cent at 82.89 cents.

The gold sector was the leading decliner on the TSX, down 2.19 per cent as the price of bullion fell sharply in the face of a stronger U.S. dollar and Goldcorp (TSX:G) reported lower earnings.

The world’s largest gold miner by market capitalization saw its shares decline more than six per cent to $22.71 on the TSX after posting a US$87-million loss in its latest quarter. That’s down sharply from a year ago, when Goldcorp reported a profit of $98 million.

South of the border, a slew of economic releases and weak earnings reports pushed markets lower.

The Dow Jones industrial average fell 195.01 points to 17,840.52, the Nasdaq plunged 82.22 points to 4,941.42 and the S&P 500 declined 21.34 points to 2,085.51.

“In April U.S. markets hit all-time record highs,” said Colum McKinley, vice-president of Canadian Equities at CIBC Asset Management.

“The Nasdaq passed highs they haven’t seen since 15 years ago, during the tech bubble, so I think some of the volatility we’re seeing today is just a pause in that story.”

McKinley said a number of companies reporting their earnings over the past few weeks have faced currency-related challenges.

“The big swings we’ve seen in the U.S. dollar and the Canadian dollar have been affecting the operating results of businesses, and so we continue to monitor that on an ongoing basis,” McKinley said.

For some companies, the effects have been positive. For example, Canadian companies that sell their products in U.S. dollars but pay their costs in Canadian dollars have benefited from the weaker Canadian currency, McKinley said.

“It is one of the things that has been a slight positive offset for Canadian energy companies, as an example,” McKinley said. “If they sell oil in U.S. dollars but their costs are in Canadian dollars, the weakness in the Canadian dollar has actually been a positive.”

In commodities, the June gold bullion contract dropped $27.60 to US$1,182.40 an ounce, while the June crude oil contract was up $1.05 at US$59.63 a barrel.

Oil prices have rallied recently as the number of U.S. rigs actively drilling for oil has fallen and tensions in the Middle East have raised concerns about supply.

“We have seen oil move higher in the near term because we have all of the ingredients that will help over the longer term resolve the supply and demand imbalance that exists in oil today,” McKinley said.

Imperial Oil saw its first-quarter income shrink by 55 per cent from a year ago to $421 million, while Suncor reported on Wednesday night a first-quarter net loss of $341 million, down sharply from a year ago where it turned a net profit of about $1.49 billion.

Shares of BCE Inc. (TSX:BCE) were down 98 cents to $53.19 as the company’s first-quarter profit suffered from a $137-million legal expense.

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