By James Langton

(June 5 – 13:00 ET) – Traders thought better of last week’s heavy rally and have returned to the sidelines this morning, pending more data that will clarify the direction for interest rates. The TSE 300 is down 25 points at midday to 9722 in sluggish trading. Volume is light at just 64.6 million shares, and favours sellers by about 3:2. Decliners are outrunning advancers by a margin of 5:4.

The groups leading the downside are ones that suffered last week, including mines and energy stocks. The difference is that traders aren’t flooding into tech stocks as they did a week ago. Media stocks, department stores and financials are all down, too.

Alberta Energy, Northstar Energy, Nexfor, Noranda and Dofasco are leading the downside. Seagram is down 2.4% this morning, leading the media stocks down. Thomson is off 25¢ after announcing its US$842 million deal for Primark.

Some of the high-flying tech stocks are coming down, too, this morning, including JDS Uniphase, Research in Motion and Ballard Power, and biotechs, such as Angiotech and QLT Phototherapeutics.

Industrials are up slightly, as are software stocks, but the gains are minimal. Golds, real estate and utilities are posting modest gains, as well. Stocks such as Certicom, 724 Solutions, Cognos, Descartes Systems and ATI Technologies are all up.

Among financials, insurers are strong, led by a 4% rise in Manulife Financial. Trimark is also active, up 60¢ to $26.20, within spitting distance of its $27 takeout price. Legg Mason Canada, the former Perigee, is also active, up almost 4%.

In the U.S. the non-manufacturing component of the National Association of Purchasing Managers report was reported down to 61.5 from 65 in April. The prices paid component fell to 65.5 from 71. April home sales also fell 3.8% in the U.S. Last week the manufacturing side of the NAPM report sparked interest rate optimism, the non-manufacturing portion is having little impact.

Stocks are mixed on Wall Street on light volume. At midday the Dow is down 18 points to 10777 in a lazy trade. NASDAQ is up slightly to 3817. The S&P 500 has slipped nine points to 1467.

Canadian small caps are continuing to gain this morning. The CDNX is up 20 points to 3401 on strong volume of 23 million shares. Techs are leading the way, joined by mines. Energy stocks are weak. Intermedia Capital is leading the way up 160% to 26¢ on 2.7 million shares.