Toronto tempers losses, U.S. markets tumble on worse-than-expected jobs data

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(The Canadian Press)

By Kristine Owram, The Canadian Press

TORONTO - The Toronto stock market tempered earlier losses while U.S. markets posted sharp declines in mid-afternoon trading amid disappointing U.S. joblessness numbers that indicate economic recovery may take longer than expected.

The S&P/TSX composite index was down 78.84 points at 10,296.07 as the August crude contract on the New York Mercantile Exchange fell US$2.55 to US$66.76 a barrel.

Each of the three major U.S. markets was down by more than two per cent by mid-afternoon in response to data that showed American employers cut a larger-than-expected 467,000 jobs in June, driving the U.S. unemployment rate up to a 26-year high of 9.5 per cent.

The unemployment rate is seen as a key barometer in the U.S. economic recovery and far exceeded the consensus expectation of 365,000 jobs lost.

ScotiaMcLeod adviser Andrew Pyle described the unemployment rate's slow climb towards 10 per cent as "death by a thousand cuts," but said the data wasn't as bad as it could have been.

However, Pyle pointed out that the average work week fell by one-tenth of an hour to 33 hours, eliminating the equivalent of another 100,000 positions.

In New York, the Dow Jones industrial average lost 175.63 points to 8,328.43.

The Nasdaq composite index gave up 42.19 points to 1,803.53 while the S&P 500 fell 20.94 points to 902.39.

The reaction to the joblessness numbers shows investors are "skittish" and may be rethinking earlier sentiments that sent markets soaring in the spring as the economy showed small signs of improvement, said Kate Warne, Canadian markets specialist at Edward Jones in St. Louis.

"The market's really been swinging emotionally. There's little bits of good news and investors are taking that as a sign of all-clear, and then there's a little bit of bad news and they take that as a sign that the worst is going to happen," Warne said in an interview.

"What investors need to remember is this is what happens at these times. This isn't unusual - whenever we're at turning points in the economy, they always take longer and they're much more erratic than people would like."

In other U.S. data, factory orders for May increased 1.2 per cent, slightly higher than the expected 0.9 per cent. However, orders still remain about 20 per cent below where they were in May 2008.

In Toronto, the energy sector fell 3.3 per cent amid lower oil prices.

A rally from below US$35 a barrel in March stalled last month on investor concern that a sluggish global economy may not recover fast enough to justify surging oil prices.

Investment banker Barclays Capital predicted that oil will likely trade between US$65 and US$75 a barrel in the July-September period, averaging $71 in the third quarter and $76 in the fourth quarter.

Suncor Energy Inc. (TSX: SU.TO) lost $2.04 or 5.8 per cent to $33.33 while its merger partner Petro Canada (TSX: PCA.TO) fell $2.59 or 5.8 per cent to $42.33.

The loonie gave up 0.9 of a cent to 86.15 cents US.

The TSX Venture Exchange slipped 2.55 points to 1,089.42.

The TSX base metals sector, up 73 per cent during the second quarter, rose 1.9 per cent.

The financials sector lost 0.8 per cent. On Tuesday, debt rating agency DBRS said it was downgrading the preferred shares of the big six Canadian banks.

The gold sector rose 1.2 per cent as the August bullion contract in New York closed down 40 cents US to US$931 an ounce. Goldcorp Inc. (TSX: G.TO) gained 95 cents to $41.38, while Barrick Gold Corp. (TSX: ABX.TO) rose 54 cents to $39.69.

U.S. markets will be closed Friday in observance of the Independence Day holiday.