Economy & Markets

Commodities decline amid disappointing U.S. durable goods data

By Malcolm Morrison |
Source: The Canadian Press

The Toronto stock market closed lower as resource stocks and commodity prices backed off on signs of weakness in the American economy.

The S&P/TSX composite index lost 98.18 points to 12,413.86 after the latest reading on American durable goods orders missed expectations. Energy stocks in particular lost ground as other data showed that U.S. oil inventories shot up to a much higher than expected 7.1 million barrels last week.

Negative American news often sends the TSX lower as the resource-heavy market is sensitive to concerns over demand for oil and metals, which in turn reflects the energy and mining stocks that make up so much of the Toronto market.

The TSX Venture Exchange slipped 24.81 points to 1,550.25.

Orders for durable goods — products expected to last at least three years, such as appliances, cars, machinery and airplanes — grew by 2.2%, against the three per cent rise expected by economists. Orders had slid by 3.7% in January.

Orders for so-called "core" capital goods, a good measure of business investment plans, rose 1.2%. It fell in January by the most in a year.

Capital Economics chief U.S. economist Paul Ashworth noted, however, that the annualized growth rate was only 1.1% when comparing three-month trends.

"That strongly suggests the first-quarter growth rate of business investment in equipment and software will be similarly lacklustre, helping to explain why most economists still expect overall first-quarter GDP growth to come in at or just below two per cent."

Sliding prices for oil and metals helped take a bite out of the commodity-sensitive Canadian dollar, which fell 0.3 of a cent to 100.21 cents US.

U.S. markets also racked up losses with the Dow Jones industrials down 71.52 points to 13,126.21.

The Nasdaq composite index lost 15.39 points to 3,104.96 and the S&P 500 index dipped 6.98 points to 1,405.54.

U.S. economic indicators have mostly surpassed expectations this year, particularly with regard to the jobs market, and that has supported stocks. However, markets stalled Tuesday after the Conference Board said its index of U.S. consumer confidence slipped in March and the Federal Reserve Bank of Richmond, Virginia reported that a measure of regional manufacturing plunged this month.

"The markets may have got a little ahead of itself," said Sadiq Adatia, chief investment officer at Sun Life Global Investment.

"We do see positive momentum, we're seeing good things but is all the doom and gloom all gone? And I think (markets) are coming to the realization that no, it's not."

Oil prices were already sharply lower following the release of the durable goods data and deepened after the U.S. Energy Department report. Analysts had expected inventories to rise by a much lower figure of 2.75 million barrels and further discouraged demand prospects.

The May crude contract on the New York Mercantile Exchange lost $1.92 to US$105.41 a barrel. The energy sector lost 1.5% with Cenovus Energy (TSX:CVE) down 86 cents to $35.40 while Canadian Natural Resources shed 52 cents to $32.83.

The base metals sector declined 3.45% as copper prices fell further following the oil inventory data, losing nine cents to US$3.79 a pound. Teck Resources (TSX:TCK.B) lost $1.18 to $34.56 while First Quantum Minerals (TSX:FM) gave back 57 cents to $18.27.

The gold sector weakened by about 1.6% while bullion backed off $27 to US$1,657.90 an ounce. Barrick Gold Corp. (TSX:ABX) faded 63 cents to $43.05 and Goldcorp Inc. (TSX:G) fell 40 cents to $44.46.

Railroad stocks fell alongside mining stocks with Canadian Pacific Railway (TSX:CP) down $1.38 to $76.52 and Canadian National Railways (TSX:CN) dropped 33 cents to $79.44.

The telecom and consumer staples sectors added support with Rogers Communications (TSX:RCI.B) ahead 63 cents to $39.11 while Shoppers Drug Mart (TSX:SC) ahead 41 cents to $44.05.

In corporate news, CVTech Group Inc. (TSX:CVT) dropped to a loss of $1.4 million in the fourth quarter as it booked a non-cash goodwill impairment charge of $2.9 million. That compared to a profit of $3 million a year ago. The company builds and maintains electrical transmission lines in Quebec and the eastern United States and its shares were off eight cents to $1.05.

Canadian Helicopters Group Inc. (TSX:CHL.A) had a $10.2-million profit in the fourth quarter, a far cry from the $28.8 million loss the company handed in a year earlier. The Montreal-based company's revenue for the quarter grew by 60% to $68.9 million. On a per-share basis the net income for the quarter amounted to 78 cents per share — blowing past the consensus estimate of 42 cents per share compiled by Thomson Reuters. Its shares ran ahead $2.27 to $29.71.

Crocodile Gold Corp. (TSX:CRK) has signed a deal to buy two mines in Australia from AuRico Gold Inc. (TSX:AUQ) in a deal worth up to $105 million, the companies said Tuesday. Crocodile Gold said deal will add 155,000 to 175,000 ounces of production for 2012 to bring the company to between 230,000 and 250,000 ounces for the year. Crocodile shares surged five cents or 10.2% to 54 cents.