TSX closes lower amid sliding gold prices, traders link jobs data with rate hike

TORONTO – The Toronto stock market closed lower Friday even as jobs data for January in both Canada and the U.S. blew past expectations.

The S&P/TSX composite index declined 41 points to 15,083.92 as losses in mining stocks cancelled out gains by financial and energy issues.

Statistics Canada reported that 35,400 positions were created in January, far higher than the 4,500 that economists had expected. However, the agency said the gains were the result of more part-time work. The unemployment rate declined 0.1 percentage points to 6.6 per cent.

The Canadian dollar was lower after jumping almost a cent on Thursday, down 0.64 of a cent to 79.85 cents US.

The loonie weakened in the face of a strengthening U.S. dollar after the U.S. Labor Department reported total employment gains of 257,000 last month, well above the approximately 233,000 positions that economists had expected. The U.S. jobless rate edged up to 5.7 per cent from 5.6 per cent.

New York markets were lower as the Dow Jones industrials moved down 60.59 points to 17,824.29, the Nasdaq lost 20.7 points to 4,744.4 and the S&P 500 fell 7.05 points to 2,055.47.

North American markets had traded higher for most of the day but a number of items encouraged sellers late in the session.

For one thing, traders considered whether the strong jobs data makes a rate hike mid-year by the U.S. Federal Reserve more of a certainty.

Also, ratings agency Standard & Poor’s downgraded Greek debt further into junk territory.

And markets had already racked up strong gains this week.

As it is, the TSX ended the week up 410 points or 2.8 per cent, paced by a 12 per cent jump in the energy sector. Oil prices have essentially stopped going straight down, having entered a period of volatility as traders try to find a bottom. Prices seem to have found some support around US$50 a barrel, but analysts caution that recent lows will be retested before firming up.

“The good news is you’re starting to see some volatility and up days — we weren’t seeing any up days,” said Kevin Headland, director, portfolio advisory group at Manulife Asset Management.

“So now we’re trying to find that floor but I would say there is a large potential to retest the lows and even hit lower lows before we see a reversal and get a trend to the upside.”

On Friday, the TSX energy sector gained 0.7 per cent with the March contract in New York ahead $1.21 to US$51.69 a barrel.

Financials were also a major support, ahead one per cent.

The gold sector was the biggest TSX decliner, down almost five per cent as bullion prices fell sharply after the release of the U.S. jobs data. April gold faded $28.10 to US$1,234.60 an ounce.

The base metals sector also dragged, down 1.25 per cent as March copper was off one cent at US$2.59 a pound.

In earnings news, Domtar Corp. (TSX:UFS) had US$71 million or $1.10 per share of net income in the fourth quarter and US$1.379 billion in sales, both up from a year earlier. Ex-items, the Montreal-based paper company had US$91 million or US$1.41 per share of adjusted earnings, well ahead of the 92 cents that analysts had expected and its shares ran up C$3.32 or 6.95 per cent to $51.11.