Toronto stocks are slumping this morning with hot U.S. consumer inflation numbers igniting fears of interest rate hikes south of the border. At midday, the S&P/TSX index is down 33 points to 8,731.

The U.S. CPI came in much stronger than expected, with the core rate advancing twice as fast as economists predicted. In Canada, the economic news was also positive, as the trade surplus widened more than expected.

Toronto volume is solid at 138.7 million shares, with selling action well ahead of the buying by a margin of 11:6. Market breadth is decidedly bearish, with losers outnumbering winners 16:7.

Health care stocks are strongest, up 0.6%. Most of the gains are quite small, however.

Interest sensitive sectors are generally getting whacked today, that means REITs and income trusts, which are both down about 2%.

The financial services group has dropped 0.8% over fears that higher rates could hamper proftis. This has Bank of Montreal down 1.5%. Manulife is 1% lower, as is TD Bank, Scotiabank is down 0.8%, and the other big banks are recording smaller slides of their own.

Apart from the financials, energy stocks, and particularly the trusts, are taking it on the chin. Enerplus Resources is down 3.2%, Petro Canada has dropped 1.2%, EnCana and TransCanada are lower too. Business trusts are also sliding, with weakness in Bell Nordiq Income Fund, Superior Plus Income Fund, Cominar REIT and Davis + Henderson Income Fund.

Other losers on the day include names such as Teck Cominco, Maax and NA Palladium. There is only very minor resistance from blue chips such as Barrick and Placer Dome, Inco and Alcan, and Nortel. Smaller golds are making some headway, with gains in Agnico Eagle, Bema Gold and Crystallex. Smaller tech names are also bouncing, such as GSI Lumonics, Cognos and Ballard Power.

Big time losers include story stocks such as Spectrum Signal, which jumped yesterday on news of a new contract. Today, it is down 19%, as some of the fizz comes out of the stock.

Metallica Resources is 14% lower on news that its wholly owned Mexican subsidiary is facing a court challenge to some of its leases in that country.

On the flip side, today’s winners include Forbes Medi-tech. It is up better than 8% on news that it is close to selling its cholesterol lowering food ingredient in Europe after the European Commission published regulations concerning the labelling of foods using these ingredients.

Dofasco has jumped 2.3% after raising profit guidance yesterday.

Neurochem is up 2% on word of additional positive interim data from tests of its anti-Alzheimer’s drug.

In earnings news, Vasogen reported that its loss for the first quarter of 2004 was $12.1 million, compared with a loss of $5.4 million in the first quarter of 2003. The increased loss resulted mainly from higher costs associated with the advancement of the clinical programs and the corporate costs associated with supporting these activities.

In other business news, Molson has reorganized its key Canadian business unit giving priority to strengthening the national core brands and adding emphasis to the development of key markets across the country.

In New York, stocks initially fell on the strong inflation data, but they are recovering their footing at midday, and the Dow Jones industrial average is now trading up 25 points to 10,406. the tech-heavy Nasdaq composite index has added six ticks to 2,036.

The S&P/TSX Venture index continues to struggle, down another 18 points to 1,796. Volume is average at 34.8 million shares, led by BioEnvelop Tech, which is down 10¢ to 73¢ on 850,600 shares traded.