TSX drops as energy prices weaken, traders digest Fed announcement

TORONTO – The Toronto stock market was pulled lower Wednesday partly by slumping oil prices while traders also had a tepid response to the U.S. Federal Reserve’s effort to help the struggling U.S. economy.

The S&P/TSX composite index dropped 29.02 points to 11,759.34 on weakness in the energy and information technology sectors. The TSX Venture Exchange slid 9.81 points at 1,254.57.

The Canadian dollar was down 0.09 of a cent at 98.12 cents US.

Crude prices closed at their lowest level since Oct. 5, following a report from the U.S. Energy Department that said supplies rose by 2.9 million barrels, or 6.4 per cent above year-ago levels.

The TSX energy sector dropped 1.3 per cent as the August crude contract on the New York Mercantile Exchange settled at US$81.80 a barrel, down $2.23.

The gold sector dropped 0.8 per cent with August gold falling $7.40 at US$1,615.80 an ounce. July copper was down half a cent at US$3.38 a pound.

Traders also responded to the Fed’s announcement that it would extend a program to swap short-term bonds for longer-term bonds, which is aimed at driving down long-term interest rates to boost borrowing and spending. But Fed chairman Ben Bernanke noted that the Fed is open to more action, if necessary.

“When you take a look overall at the reaction … (the decision) was, to some extent, a bit disappointing,” said Emanuella Enenajor, an economist at CIBC. “There were some expectations that the Fed could potentially do more.”

After the Fed’s decision, trading was volatile, as focus turned to the Fed’s decision to cut its estimates for economic growth, while also giving signs the U.S. jobs market remains troubled.

The Dow recovered most of a 90-point decline, ending down 12.94 points to 12,824.39. The Nasdaq composite index rose 0.69 of a point to 2,930.45 and the S&P 500 index was down 2.29 points at 1,355.69.

“You saw the positive response in anticipation over the last two days, and now (the Fed) has acted and they haven’t done more,” said Norman Raschkowan, North American strategist for Mackenzie Financial Corp.

“The general view is that (they’ve) already done quite a bit along that line and there’s limited incremental benefit that’s going to provide.”

The information technology sector dropped 1.7 per cent as BlackBerry-maker Research In Motion (TSX:RIM) confirmed it has laid off some staff as part of a previously announced cost-cutting initiative.

RIM shares fell 4.3 per cent, or 47 cents, to $10.49. While RIM wouldn’t confirm how many jobs were cut, advance estimates for this round of layoffs have ranged from 2,000, or about 12 per cent of its workforce, to 5,000, or about 30 per cent.

Shares in Celestica Inc. (TSX:CLS), which announced earlier this week that it was ending its manufacturing services agreement with RIM, were down 2.6 per cent, or 20 cents, at $7.60.

Bombardier Aerospace (TSX:BBD.B) has won an order from Danish leasing company Nordic Aviation Capital valued at US$595 million. The company will provide Nordic Aviation with 12 CRJ1000 aircraft that will be leased to Garuda Indonesia airlines. Bombardier Inc. shares dropped two cents to $4.03.

Alimentation Couche-Tard Inc. (TSX:ATD.B) has succeeded in its protracted, $2.7-billion takeover bid for Norway’s Statoil Fuel & Retail ASA. The company said almost 91 per cent of Statoil Retail’s shares have now been tendered to the offer, which is above the 90 per cent threshold at which Couche-Tard has said it would initiate a compulsory acquisition of the rest of the shares in the company. Couche-Tard stock rose $2.24 to $45.25.

SiriusXM Canada wants the CRTC to slash its mandatory contributions to Canadian content development. The company continues to lose money at what it calls a “disturbing” rate, and will take its case to the regulator on Thursday. Shares of parent company Canadian Satellite Radio Holdings Inc. (TSX:XSR) were down 8.2 per cent, or 30 cents, to $3.35.

Statistics Canada said there was an average of 248,000 job vacancies in the country in three-month period ended in March, up 19,000 from the same period in 2011. However, it says there were just 5.8 unemployed people for every vacancy, down from 6.5 in March 2011. That was because of both an increase in vacancies and a decline in the number of unemployed people.

On the political front, Greece’s socialist party head and former finance minister Evangelos Venizelos says that an agreement has been reached for a coalition government. Details on who will be in cabinet were still being discussed and were to be finalized by Wednesday night.

In the U.S., Procter & Gamble Co. (NYSE:PCG) said that it expects slow growth in developed markets to remain steady. The world’s largest consumer products maker, which manufactures Tide detergent, Pampers diapers and Duracell batteries cut its estimates for fourth-quarter revenue and income. The company also reined in recent price increases due to lower consumer spending. Shares were down 46 cents to US$44.66.

Consumer spending accounts for about 70 per cent of all economic activity in the U.S. With few companies hiring, the weak forecast from P&G was a worrisome sign that one of the country’s most important economic engines may be weakening.

Further insight into the U.S. consumer will come to light next week when both personal income and consumer sentiment data are released.