Commodities lead declines on TSX as data raises doubts about recovery

By Malcolm Morrison, The Canadian Press

TORONTO - The Toronto stock market was sharply lower for a fourth session Wednesday as U.S. data continued to raise doubts about the strength of the American economy.

The S&P/TSX composite index lost 106.6 points to 10,947 after a surprising drop in American consumer confidence during October helped send the main index down 181 points Tuesday.

That added up to a loss of about four per cent over the last three sessions. Analysts also pointed out that a round of profit taking wasn't surprising considering the TSX had gained about 50 per cent since the lows of March with hardly a break.

But that gain was based on hopes for a strong economic rebound being place by late this year and recent data, including the drop in U.S. consumer confidence, have shaken those hopes.

Sales of new homes dropped unexpectedly last month, falling 3.6 per cent to a seasonally adjusted annual rate of 402,000 from a downwardly revised 417,000 in August. Economists surveyed by Thomson Reuters had expected a rise of 2.6 per cent.

The median sales price of US$204,800 was off 9.1 per cent from a year earlier, but up 2.5 per cent from August.

The U.S. Commerce Department also reported that orders for durable goods increased one per cent last month, matching economists' expectations. Excluding transportation, orders rose 0.9 per cent, slightly better than the 0.7 per cent that economists had forecast. But orders for August were revised downward to reflect a 2.6 per cent drop. Orders less transportation for August were revised lower to reflect a 0.4 per cent decline.

The Canadian dollar was down 0.72 of a cent to 93.08 cents US.

All TSX sectors were negative with the energy group down 1.5 per cent as the December crude contract on the New York Mercantile Exchange dropped $1 to US$78.55 a barrel despite data from the American Petroleum Institute showing a decline of 3.5 million barrels in crude inventories for the week ended Oct. 23. Suncor Inc. (TSX: SU.TO) declined 52 cents to C$36.49 on the TSX.

Nexen Inc. (TSX: NXY.TO) reported that its profit in the third quarter fell to $122 million or 23 cents a share, down 86 per cent from the same time last year, beating analyst estimates by a penny a share. Nexen's revenue was cut in half to $1.1 billion from $2.2 billion due to a combination of lower output because of maintenance downtime, reduced sales volume because of the economy and lower prices. Nexen shares were down 35 cents to $23.64.

Mining stocks were also under pressure as the December copper contract on the New York Mercantile Exchange backed off three cents to US$2.97 a pound and the base metals sector lost 3.5 per cent. Teck Resources (TSX: TCK-B.TO) dropped $1.70 to $31.6.

Sherritt International Corp. (TSX: S.TO) reported that net income fells to $55.9 million or 19 cents per share in the third quarter, down from $133.1 million or 45 cents per share a year earlier because of lower commodity prices, "largely due to the impact of relatively weakened global industrial demand on the base metals market."

Revenue fell 18.5 per cent to $389.6 million and its shares stepped back 30 cents to $6.95.

The gold sector was down slightly as December bullion on the Nymex lost 90 cents to US$1,034.50 an ounce.

The TSX Venture Exchange eased 16.1 points to 1,290.36.

Economic data also depressed New York markets and the Dow Jones industrial average was off 12.8 points to 9,869.4.

The Nasdaq composite index gave back 16.5 points to 2,099.59 while the S&P 500 index was down six points to 1,057.4.

In other Canadian earnings news, Maple Leaf Foods Inc. (TSX: MFI.TO) shares ran up 37 cents to $10.83 as the company said quarterly net income came in at $22.5 million or 17 cents a share, compared to a net loss of $12.9 million or 10 cents a share a year ago. Last year's third-quarter had felt the brunt of a listeria-induced recall at a Maple Leaf plant in Toronto.

Quarterly revenues for the company dipped to $1.29 million from $1.34 million last year.

Methanex Corp. (TSX: MX.TO) fell to a third-quarter loss of $831,000 or a penny per share as revenue fell due to lower methanol prices. In the prior-year period it posted a profit of $70 million or 74 cents per share. Analysts were expecting a loss of four cents a share and its shares were down 53 cents to $18.46.

In the U.S., ConocoPhillips said Wednesday that low natural gas prices and thin margins from its gasoline refining business drove profits down 71 per cent in the third quarter, but the oil company is ramping up production as crude prices jump.

The third-largest U.S. oil company made $1.5 billion, or $1 per share, for the quarter while revenue totalled $41.3 billion, down from $71.4 billion in the year ago quarter.

And in another sign the financial sector still might not be fully recovered, GMAC Financial Services is in talks with the Treasury Department for a third bailout. The auto and mortgage lender has been among the hardest hit financial firms by rising loan defaults and faulty credit markets.

The U.S. government already holds a 35 per cent stake in GMAC after giving it with US$12.5 billion in bailout money.

Major Asian markets fell as signs American consumers were struggling undermined hopes for a stronger turnaround in the world's largest economy.

In Japan, the benchmark Nikkei 225 index lost 1.4 per cent while Hong Kong's main index retreated 1.8 per cent.

London's FTSE 100 index lost 1.87 per cent, and Frankfurt's DAX fell 1.83 per cent and the Paris CAC 40 declined 1.68 per cent.