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Jan. 20, 2010 (Baystreet.ca) --
Worries about tighter lending standards in China sparked sharp losses on the Toronto stock market Wednesday afternoon.
The S&P/TSX Composite Index fell 84.10 points to finish the day at 11,603.15.
Investors also took in data showing that volatile gasoline prices pushed Canada's annual inflation rate up in December. The better-than-expected inflation reading, along with strength in the U.S. dollar and weak oil and metal prices, depressed the Canadian dollar.
Statistics Canada said today that consumer price index rose 1.3% in the 12 months to December, after rising 1% in the previous month. The rise was primarily due to gasoline prices, which rose 25.6% year over year in December.
The agency noted that December's on-year increase was the largest since February 2009. The inflation came in at less than the widely expected rise of 1.6% and stayed below the central bank's target.
In other economic news, Statistics Canada said country's manufacturing sales inched by a less-than-expected 0.1% in November, mainly pressured by a 4.3% slide in transportation industry.
Commodity prices backed off after the chairman of the Chinese Banking Regulatory Commission said that China will slow its massive lending spree and step up monitoring of banks as it tries to prevent speculative bubbles in real estate and other assets while keeping the country's economic recovery on track.
Liu Mingkang said the total amount of loans will grow by as much as 18% in 2010 year over year, compared to nearly 32% in 2009.
The regulators comments raised fears that China's strong economic recovery could fade, undermining a fragile global economy.
The gold sector was down, as Barrick Gold declined $1.21 to $39.70 while Goldcorp Inc. faded $1.58 to $40.02.
The base metals sector was down as the March copper contract on the Nymex declined nine cents to $3.35 U.S. a pound. Teck Resources lost 29 cents to $41.47 and Labrador Iron Mines Holdings fell 39 cents to $6.65.
The Toronto energy sector moved down as Imperial Oil lost 48 cents to $40.15 while EnCana Corp. fell 25 cents to $35.39.
The TSX financial sector weakened, as Scotiabank fell 34 cents to $45.95.
And shares in Sun Life Financial dipped 17 cents to $32.68 as it announced it will pay at least $20 million U.S. for the naming rights to the stadium of the NFL's Miami Dolphins, home of this year's Super Bowl.
A source close to the deal says Canada's third-largest insurance company has secured the rights for at least five years, paying $4 million U.S. each year.
In other Canadian economic news, declines in sales by Canada's aerospace and auto industries held back manufacturing sales gains in November, which logged a slim 0.1% rise to $42.6 billion for the month
Elsewhere on the corporate front, Calgary-based Superior Plus Corp. said it has agreed to buy Griffith Holdings, a retail and wholesale fuel distributor in upstate New York for $125 million U.S.
The diversified company added it will still slash its outlook for the year to between $1.95 and $2.15 a share in operating cash flow from its earlier prediction of $2.05 to $2.25 as the economic downturn continues to weigh on its results. Its shares lost 68 cents to $14.15.
A South African provincial government surprised First Uranium Corp. by withdrawing authorization for a new tailings storage facility. Its shares tumbled 56 cents, or 21.1%, to $2.10.
The Canadian dollar plummeted 1.48 cents to 95.58 cents U.S.
ON BAYSTREET
All but four of the 14 TSX subgroups ended the day lower. Gold stocks were off 2.8%, metals and mining stocks wobbled 2.4%, while materials declined 2.3%.
The four gainers were led by real-estate issues, up 0.5%, while telecoms and consumer discretionaries were ahead 0.4%.
The TSX Venture Exchange gave back 22.17 points to 1,590.69, while the Nasdaq Canada index subtracted 16.46 points to 712.25.
ON WALLSTREET
In New York, stocks slumped Wednesday as a strong dollar and questions about China's lending practices slammed commodities, one of the leaders of the recent rally.
The Dow Jones Industrials took off 122.28 points, or 1.1%, to close at 10,603.15. The S&P 500 stepped back 12.19 points to 1.138.04, and the Nasdaq let go of 29.15 points to 2,291.25.
IBM dragged on the tech sector as investors picked apart the company's outlook one day after sending the stock higher.
A stronger dollar pressured dollar-traded commodity prices and stocks. The sector was also hit by reports that China intends to slow the pace of lending this year in an attempt to get ahead of inflation.
Commodities were also under pressure in reaction to the dollar, which firmed up in comparison to a weak euro and in response to the surprise Republican Senatorial victory in Massachusetts.
IBM and the techs led stocks higher Tuesday and IBM and the techs were among the biggest drags Wednesday, as investors backtracked one day after the Dow, S&P 500 and Nasdaq ended at the highest levels since Sept. 2008.
With IBM, the earnings and profit margins were good, but the revenues were mostly in line with forecasts and the outlook was good not great, relative to high expectations, Chalupnik said.
Declines were broad based, with 26 of 30 Dow components falling, led by IBM, Hewlett-Packard, Chevron, Exxon Mobil, Boeing, United Technologies and Wal-Mart Stores.
The tech leader reported higher quarterly sales and earnings late Tuesday that topped estimates. But investors took a "sell the news" approach and sent shares 3% lower Wednesday.
IBM said it earned $3.59 U.S. per share versus $3.28 U.S. a year earlier. Analysts surveyed by Thomson Reuters thought it would earn $3.47 U.S. per share. Sales inched up to $27.23 billion U.S. from $27 billion U.S. in the prior year versus forecasts for a drop to $26.96 billion U.S.
Looking forward, IBM said it expects earnings per share of at least $11 U.S. for 2010.
Dow component Bank of America said losses widened to $5.2 billion U.S. in the fourth quarter of last year, partly due to the bank paying back government bailout funds. BofA said the repayments shaved $4 billion U.S. off its bottom line.
The company was expected to post a loss of $3.9 billion U.S., according to forecasts. On a per-share basis, BofA lost 60 cents U.S. versus forecasts for a loss of 52 cents U.S.. Shares were barely changed.
Morgan Stanley reported its second-straight quarterly profit, one year after posting a massive loss. The financial firm said it earned $617 million U.S. for the quarter versus a loss of $11 billion U.S. a year ago. The stock fell around 1%.
Wells Fargo reported a surprise profit of $2.82 billion U.S., or eight cents a share, versus forecasts for a small loss. The bank benefited from stronger fee income, even as it repaid $25 billion U.S. in bailout money.
Investors were also assessing the surprise Republican election to the Massachusetts Senate seat previously held by the late Ted Kennedy.
The upset victor could kill health-care reform by ending the Democrats' filibuster-proof majority in the Senate. Additionally, House Democrats are mostly opposed to the idea of passing the Senate health care bill.
Investors may also be betting that the change in the balance of power in the Senate will mean other Congressional spending programs could be cut back or set aside, which had an impact on the dollar.
The government released reports on housing starts and building permits, with mixed results.
Building permits soared to an annual rate of 653,000 units in December, according to the Census Bureau. This was much higher than the expected rate of 580,000, according to a consensus of economists surveyed by Briefing.com. That's compared to a revised figure of 589,000 for the prior month.
Housing starts dropped to an annual rate of 557,000 units in December, according to the Census Bureau. Briefing.com consensus had expected at an annual rate of 575,000 for December, according to the Briefing.com consensus. That's compared to the revised figure of 580,000 in November.
The Producer Price Index, a reading of inflation at the wholesale level, rose 0.2% in December, said the Bureau of Labor Statistics. The PPI was expected to be flat for December, according to Briefing.com consensus, after gaining 1.8% the prior month.
The core PPI, which excludes volatile food and energy prices, was flat, the government said.
The Federal Housing Administration is also due to announce stricter standards for getting a government-backed mortgage loan on Wednesday.
Treasury prices jumped, lowering the yield on the 10-year note to 3.65% from 3.70% late Tuesday. Treasury prices and yields move in opposite directions.
The price of a barrel of oil fell $1.66 to $77.36 U.S.
Gold prices tumbled $27 to $1,113 U.S.