Financials, resource stocks push TSX lower, data shows weakening manufacturing

TORONTO - The Toronto stock market has started the 2014 trading year in the red in the wake of manufacturing data that indicated the sector is still growing but at a slower pace.

The S&P/TSX composite index closed down 27.36 points at 13,594.19 on Thursday.

The Canadian dollar lost early momentum as the U.S. dollar gained against other currencies and was down 0.33 of a cent at 93.69 cents US.

U.S. losses were steeper as investors stepped back following strong double digit gains in 2013 despite further evidence that U.S. layoffs are low and hiring will likely remain steady. The Labor Department said that the number of Americans seeking unemployment benefits dipped 2,000 last week to a seasonally adjusted 339,000.

Applications are a proxy for layoffs and appear to have stabilized near pre-recession levels at a level consistent with solid hiring.

The Dow Jones industrials dropped 135.31 points to 16,441.35, the Nasdaq declined 33.52 points to 4,143.07 and the S&P 500 index was down 16.38 points at 1,831.98.

The Institute for Supply Management's latest reading on the American manufacturing sector showed slowing expansion, with its index coming in at 57 for December, down slightly from 57.3 in November. That reading met expectations.

Royal Bank’s (TSX:RY) Canadian Manufacturing Purchasing Managers' Index also showed the manufacturing sector growing, but at a slower pace as well. It came in at 53.5 for December, down from 55.3 in November.

And two manufacturing surveys released Thursday showed Chinese activity slowed in December. The China Federation of Logistics & Purchasing said its purchasing managers index declined to 51 from November’s 51.4 on a 100-point scale. Numbers above 50 show an expansion. A separate survey by HSBC Corp. declined slightly to 50.5 from 50.8 in November.

Meanwhile, the eurozone manufacturing purchasing managers index in December was confirmed at 52.7 as expected.

"It’s good news and bad news, I guess," said Ian Nakamoto, director of research at 3MACS.

"Good news in the sense that the Federal Reserve is unlikely to be aggressive in tapering. Bad news in that maybe investors have been bidding up the market because they thought economic data would be stronger than expected. The past few months have been pretty good numbers."

The Fed announced last month it would start trimming its US$85 billion of monthly bond purchases by $10 billion a month starting in January with further tapering dependent on economic data.

Commodity prices were mixed in the wake of the manufacturing data with the February crude contract on the New York Mercantile Exchange down $2.98 to US$95.44 a barrel.

A strengthening greenback also depressed prices. That's because a stronger dollar makes commodities such as oil that are priced in dollars more expensive to buyers using other currencies.

The TSX energy sector declined 0.73 per cent as Canadian Natural Resources (TSX:CNQ) lost 59 cents to C$35.35.

Financials also contributed to the day's losses after investors took some profits from a sector that jumped over 20 per cent last year. The sector lost 0.6 per cent as Sun Life Financial (TSX:SLF) gave back 51 cents to $37.01.

Industrials were also a weight, with business services firm Stantec (TSX:STN) down $1.49 at $64.37.

The base metals sector drifted 0.24 per cent lower as March copper dipped a cent to US$3.38 a pound. Turquoise Hill Resources (TSX:TRQ) shed 10 cents to C$3.41.

TSX losses were held in check by a sharp uptick in the gold sector as bullion prices rebounded. The gold sector was up about 4.45 per cent as February bullion climbed $22.90 to US$1,225.20 an ounce after the precious metal tumbled 28 per cent last year. Goldcorp (TSX:G) gained $1.09 to C$24.13 as investors wondered if the gold sector might have been oversold in 2013.

North American markets started a fresh trading year on the back of a solid lift for 2013 with the TSX ahead 9.55 per cent. Gains would have been stronger had it not been for a slide of almost 50 per cent in the gold sector and a 21 per cent tumble in base metals.

U.S. markets racked up stronger advances, benefiting from another year of stimulus measures from the Federal Reserve with the Dow jumping 26.5 per cent.

On the corporate front, the price of Fiat shares on the Milan exchange soared 12 per cent after the Italian automaker announced it had clinched a deal to acquire the rest of Chrysler.

Fiat SpA said Wednesday night that it had reached an agreement with the United Auto Workers whose union-controlled trust fund holds 41.5 per cent of Chrysler’s shares. Fiat already possesses the remaining shares. Fiat says it will pay $1.75 billion in cash. An additional $1.9 billion will be paid as extraordinary dividends.