Stock markets lower as Goldman Sachs, Citigroup earnings reports disappoint

By Malcolm Morrison, The Canadian Press

TORONTO - The Toronto stock market moved lower in early trading Thursday amid investor disappointment with the latest earnings reports from the U.S. financial sector.

The S&P/TSX composite index lost 69.5 points to 11,463.3 after rising oil and positive earnings reports from American bank JPMorgan Chase and chip giant Intel Corp. sent the main index up 119 points on Wednesday. The TSX Venture Exchange fell 10.02 points to 1,326.68.

The Canadian dollar was having a rare down day, declining 0.44 of a cent to 97.04 cents US after a weak U.S. currency sent the loonie up a full cent on Wednesday.

On the economic front, Statistics Canada reported that declines in the aerospace and vehicle manufacturing segments were largely responsible for a 2.1 per cent drop in manufacturing sales in August. The dip followed a 5.2 per cent gain in July.

Production in the aerospace product and parts industry fell 35.6 per cent while manufacturing sales in the motor vehicle industry fell 6.3 per cent during August.

Commodity stocks led the way lower on the TSX with the energy sector down 0.8 per cent as the November crude contract on the New York Mercantile Exchange rose 21 cents to US$75.39 a barrel ahead of the release of U.S. crude inventories later in the morning. Canadian Natural Resources (TSX: CNQ.TO) lost 68 cents to C$76.81.

New York markets were also lower after Goldman Sachs said Thursday that it earned US$3.19 billion, or US$5.25 per share in the third quarter. Analysts had been expecting earnings of $4.24 per share, on average.

However, investors reacted coolly to the firm's results as revenue from its mergers and acquisitions operations dipped sharply from the previous quarter, reflecting the general slowness in takeover activity, and its shares lost $4.18 to US$188.10.

And Citigroup reported a US$101 million profit before accounting for $288 million in preferred stock dividends and the debt exchange offer that gave the U.S. government a 34 per cent stake in the bank. The exchange offer, which gave Citigroup a better mix of capital to withstand additional loan losses and further weakening in the economy, took earnings down $3.06 billion.

Including those items, the New York-based bank was weighed down by billions of dollars in failed loans and posted a US$3.24 billion loss. Its shares fell 20 cents to US$4.80.

The TSX financial sector drifted 0.47 per cent lower in the wake of the Goldman Sachs and Citigroup reports.

The Dow Jones industrials lost 18.4 points to 9,997.4.

Results from JPMorgan set a high bar for its peers on Wednesday, reporting a US$3.59 billion profit that came in well above Wall Street's expectations and sent the Dow above 10,000 for the first time in a year.

The Nasdaq composite index declined 8.46 points to 2,163.77 while the S&P 500 index moved down 3.4 points to 1,088.6.

Also depressing sentiment was world-leading mobile phone maker Nokia Corp. The Helsinki-based company reported a loss of euro559 million (US$832 million) in the third quarter, taking hits from a 20 per cent drop in sales and a one-time charge for the fallen value of its network equipment unit.

Nokia made a profit of euro1.09 billion (US$1.61 billion) in the same quarter of 2008 and its shares fell $1.61 to US$13.78.

Tech firms Google Inc., IBM Corp. and Advanced Micro Devices will issue their results after the market's close Thursday.

Other commodity prices were also soft as the December bullion contract on the Nymex eased $11.30 to US$1,053.40 while December copper lost four cents to US$2.81 a pound.

The TSX base metals sector fell 1.2 per cent with Teck Resources (TSX: TCK-B.TO) off 25 cents to $34.08 while the gold sector backed off 1.6 per cent as Barrick Gold Corp. (TSX: ABX.TO) faded 51 cents to $40.47.

In other corporate news, Canwest Global Communications Corp. said it has been notified by the Toronto Stock Exchange that its subordinate voting shares (TSX: CGS.TO) and non-voting shares (TSX: CGS-A.TO) will be delisted at the close of trading Nov. 13 because of failure to meet listing requirements. Trading in the shares will be suspended.

The media conglomerate's stock was halted Oct. 5 when it filed for creditor protection under a mountain of debt.

In Asia, stocks had rallied hard, as investors caught up with the gains posted in Europe and the U.S. Wednesday.

In Japan, the Nikkei 225 stock average gained 1.8 per cent, and Hong Kong's benchmark added 0.5 per cent, hitting a new high for the year during trade.

London's FTSE 100 index was down 0.56 per cent, Frankfurt's DAX fell 0.52 per cent while the Paris CAC 40 declined 0.27 per cent.