Source: The Canadian Press

The Toronto stock market closed lower Friday as investors looked back at a volatile month and adjusted expectations for economic growth amid more unsettling news from Europe.

The S&P/TSX composite index moved down 77.68 points to 11,671.54 and the TSX Venture Exchange added 0.04 of a point to 1,502.88.

The TSX ended the week up 1.3% following a string of volatile sessions. But North American indexes are down sharply from the 2010 highs at beginning of the month, mainly over worries about Europe’s debt crisis.

What started as concern over whether Greece could control its unsustainably high deficit has grown to worry about whether the euro currency itself can survive the government debt problems of several countries, mainly in southern Europe, which are now having to slash spending.

Those worries grew again Friday after ratings agency Fitch downgraded Spain’s credit rating for the second time in a month. Fitch said the country’s plan to cut its budget will likely slow economic growth.

As May draws to a close, the Toronto market’s main index is down 5% from its 2010 highs posted April 26, while the Dow Jones industrials average has fallen almost 10%.

The slide comes as investors doubt the strength of the economic recovery will match the expectations of a few months ago when the market had recovered about 60% from the lows of March, 2009.

“The markets right now are readjusting. They’re basically readjusting and starting to discount (for) a slower growth environment, economically, and for earnings,” said Paul Vaillancourt, vice-president at Canadian Wealth Management in Calgary.

“When we look at leading economic indicators, they have rebounded all over the world, even the eurozone. But the rate of growth is starting to indicate perhaps they are cresting, which is consistent with… this stage of a cyclical recovery.”

The Canadian dollar fell 0.18 of a cent to 95.06 cents US as the loonie, the euro and other currencies slipped after the Fitch downgrade.

The base metals sector was the leading decliner, down 2.12% with July copper five cents lower at US$3.10 a pound. Teck Resources (TSX:TCK.B) declined 99 cents to C$35.80 and HudBay Minerals (TSX:HBM) was down 24 cents at C$11.94.

The financial sector declined 1.36% after the group hobbled the TSX Thursday with earnings reports from Royal Bank (TSX:RY), CIBC (TSX:CM) and TD Bank (TSX:TD) that missed analyst expectations, even as the trio reported sharply higher profits from a year ago.

On Friday, Royal Bank (TSX:RY) dropped $1.46 to $55.39.

After the market close Thursday, National Bank (TSX:NA) said it earned $261 million, up $20 million from a year ago. The bank’s profit amounted to $1.50 per diluted share, better than the average analyst estimate of $1.46 per diluted share, according to Thomson Reuters. Return on equity was 18%, down from 18.5% a year ago. Its shares gave up an early gain Friday to close 52 cents lower at $57.55.

The TSX energy sector was slightly higher even as the June crude contract on the New York Mercantile Exchange lost 58 cents to US$73.97 a barrel. But Suncor Energy (TSX:SU) lost 29 cents to C$32.08 and Imperial Oil (TSX:IMO) fell 94 cents to C$39.95.

The sector failed to find much lift from moves by western Canadian provincial governments to offer fresh incentives for the energy industry.

The Alberta government announced a new royalty incentive program Thursday aimed at encouraging energy companies to drill technically challenging wells in the province. Under the new rules, shale gas, coalbed methane and horizontal oil and gas wells drilled as of May 1 will pay a maximum 5% royalty rate.

And in Saskatchewan, the government has announced a royalty break that it hopes will stimulate production from a particular type of natural gas well. For the next three years, the province will not charge any royalties on the first 25 million cubic metres of gas produced from horizontally drilled wells.

Bullion was up slightly, with the June contract on the Nymex up 30 cents at US$1,212.20 an ounce. But gold stocks moved lower with Barrick Gold Corp. (TSX:ABX) off 36 cents at C$44.25.

New York markets were lower amid data showing that consumer spending failed to increase for the first time in seven months, but personal income inched higher.

The Dow Jones industrial average lost 122.36 points to 10,136.63 amid low volume ahead of the long Memorial Day weekend. U.S. markets are closed Monday.

The Nasdaq composite was down 20.64 points at 2,257.04, while the S&P 500 index lost 13.65 points to 1,089.41.

The U.S. Commerce Department said Friday that consumer spending was flat in April, compared with the previous month. Economists polled by Thomson Reuters had forecast spending would rise 0.3%.

Meanwhile, personal income rose 0.4%, slightly worse than the 0.5% growth forecast by economists.

In other corporate news, shares of Theratechnologies (TSX:TH) charged ahead $1.95 or 67.24% to $4.85 after the company announced a step towards U.S. regulatory approval for marketing its drug tesamorelin. The company said Thursday that a U.S. Food and Drug Administration committee voted that the drug, used to treat excess abdominal fat in HIV patients with lipodystrophy, should be granted marketing approval by the FDA.

Zarlink Semiconductor (TSX:ZL) earned US$6.8 million for the quarter ended March 26 compared with a loss of US$50 million a year ago. Its shares ran ahead 20 cents or 12.74% to $1.77.

Garda World Security Corp. (TSX:GW) reported first-quarter profit of $6.3 million, an increase from $2.5 million a year ago. Revenues slipped to $272.3 million from $279.2 million but its shares jumped 90 cents or 11.66% to $8.62.