Toronto stock market declines, oil prices fall back amid rising inventories

TORONTO – Falling oil stocks helped pull the Toronto stock market lower Wednesday as further signs of rising crude inventories in the U.S. sent oil prices tumbling.

The S&P/TSX composite index dropped 67.23 points to 14,995.65, paced by a four per cent drop in the energy sector.

The Canadian dollar — a big beneficiary of the recent rally in oil prices — tumbled 1.08 cents to 79.59 cents US after rising two cents over the previous two sessions.

U.S. indexes were mixed amid positive news on the employment front two days before the release of the U.S. government’s jobs report for January. Payroll firm ADP reported that the American private sector created 213,000 jobs last month. Overall, economists are expecting the government data to show the economy created 233,000 jobs in January.

Other data showed greater expansion of the U.S. service sector last month. The Institute for Supply Management’s non-manufacturing index rose to 56.7 from 56.5.

The Dow Jones industrials gained 6.62 points to 17,673.02, the Nasdaq was down 11.04 points at 4,716.7 and the S&P 500 index shed 8.52 points to 2,041.51.

Crude prices gave back a chunk of the 19 per cent surge registered over the previous four sessions, down $4.60 to US$48.45 a barrel. Prices started heading higher late last week following a string of cutbacks in capital spending by oil companies — and in some cases production cuts — raising hopes for relief from a huge imbalance in demand and supply.

However, data released Wednesday by the Department of Energy showed U.S. inventories last week rose by 6.3 million barrels, much higher than the 2.8-million-barrel increase that analysts had expected.

Crude prices have plunged about 50 per cent since last summer amid a glut of supply on world markets.

Analysts have warned that oil prices could retest lows of $44 or even move lower. In the meantime, investors are trying to look past the volatility in the markets.

“You look through the valley, as we say. The thing that you have to remember is that equity markets look six months ahead,” said Chris King, portfolio manager and vice-president at Morgan, Meighen and Associates.

He pointed out that the U.S. is dramatically cutting shale production while many Canadian companies have announced substantial cuts in spending plans.

“The big (energy) names are pricing in high $70s, low $80s for oil because they are looking through (to) the other side.”

The other big TSX decliner was the base metals sector, which advanced over the last few days on a run-up in copper prices. The sector gave back 2.65 per cent even as March copper added a penny at US$2.59 a pound.

The gold sector was the leading advancer, up 2.7 per cent as April bullion climbed $4.20 to US$1,264.50 an ounce.

The TSX was also supported by strong gains in the consumer staples and tech sectors.

In earnings news, General Motors Co. posted quarterly profit of US$1.99 billion or 66 cents per share. Earnings adjusted for non-recurring costs were $1.19 per share. The average estimate of analysts was for earnings of 85 cents per share. GM also reported that revenue of $39.62 billion, missing expectations for $40.1 billion but its shares were ahead 5.45 per cent to $35.83.