Good news for U.S. workers is translating into bad news for markets Thursday. The S&P/TSX composite index is down sharply at midday, dropping 63 points at midday to 8,394.

U.S. initial jobless claims slipped last week, while productivity numbers came out in line with expectations, but they also harboured signs of wage inflation. Both factors have traders worried about interest rate hikes.

Throw in comments from Federal Reserve head, Alan Greenspan, who warned about the impact of large budget deficits and huge consumer debt in the U.S., and traders are dumping stocks across the board..

Toronto volume is on the soft side at 121.1 million shares, with the selling action outpacing the buying by a margin of 25:11. Market breadth is very weak too, as losers outnumber winners by a seven to four edge.

Every sector of the TSX is lower at midday, apart from consumer staples, which is flat. Golds are down 2.4%, miners and materials have dropped 2.2%, health care stocks, telecoms and trusts are all notably weaker, too.

Alcan is leading the way down, dropping more than 3% in strong volume on news that the company reported net income of $106 million, compared with a net loss of $27 million a year earlier. Alcan said that it expects world demand for primary aluminum to grow by 8.0% in 2004, and it now forecasts a market deficit of 430,000 tonnes for 2004, up from its earlier forecast of 170,000 tonnes.

Other old economy companies are getting whacked too, on the general economic concern. Bombardier has dropped 2.3%, Placer Dome is down 1.3%, Suncor Energy is weaker, as is Canadian Natural Resources, Noranda, Fording, Northgate Exploration, and Eldorado Gold. EnCana is 1% lower on news that it has abandoned a drill off the coast of Nova Scotia, after it failed to strike anything.

There are a couple of winners in the energy sector though, as both Talisman and Penn West Petroleum are bucking the trend and making gains today. First Calgary Petroleums is up, too.

Techs are sliding, too, with recent winner Research in Motion dropping almost 4%. Ballard Power and Cinram have both dropped sharply too, as has Aeterna Labs. Against this, Nortel is holding up, gaining 3% in decent volume on news that it is still signing supply deals. It announced contracts with FedEx and Telenet.

The financials are down modestly amid all the selling, with Royal Bank 0.4% lower and Bank of Montreal and Manulife down similar amounts. CIBC is up a little though.

The few gains are coming on good stock-specific news. BW Technologies is up 19% on word that it has entered into a pre-acquisition agreement with First Technology PLC to be acquired for cash of $36 per BW Technologies share.

Vanguard Response Systems is up another 8% on news that it has been awarded a contract from the U.S. Marine Corps to develop equipment that will spray a specialized anti-traction gel.

Other gainers include Creo, CGI Group, Cogeco, Mitec, Ipsco and Quebecor.

Quebecor generated net income of $5.2 million in the first quarter of 2004, compared with $11.0 million in the same quarter of 2003. The decrease was mainly due to the recording of a higher income tax expense in the first quarter of 2004, a loss on settlement of debt (versus a net gain in 2003) and a higher restructuring reserve. These factors were partially offset by favourable variances in amortization charges and financial expenses. Quebecor World generated quarterly net income of $26.7 million (U.S.), compared with $16.3 million (U.S.) in the same period of 2003.

In other earnings news, Trizec Properties reported, for the first quarter of 2004, net income totaled $83.3 million, compared with $58.0 million for the same period in 2003.

Four Seasons Hotels said its first quarter net earnings were $11.5 million, as compared with a net loss of $9.3 million for the first quarter of 2003.

Magna earned net income for the first quarter of $184 million. Magna also said that it expects its sales for the full year 2004 to be between $18.5 billion and $19.4 billion, compared with 2003 sales of $15.3 billion. Management expects the higher sales this year to result in earnings growth for full year 2004.

SNC-Lavalin has posted consolidated net income for the first quarter of $18.8 million, compared with $18.3 million for the corresponding period last year.