Stocks continue to fall this morning, as investors worry about corporate profits and the U.S. economic recovery. At midday, the S&P/TSX composite index is down 114 points to 6,601.

Volume is on the heavy side at 108.4 million shares, with buying ahead of selling by about 12:7. Market breadth is decidedly negative though, with losers outnumbering winners by more than two to one.

The golds are the beneficiary of broad-based selling today, they are up almost 4%. There is heavy selling in almost every other sector, as weak profit forecasts in Sun Micro and Microsoft has hurt the expectations for other corporations.

Industrials are down 3%, techs and health care have dropped 2%, financials are down 2.4%, and there’s weakness in consumer stocks, telecoms, utilities and energy plays.

The wider U.S. trade gap is causing some concern, overwhelming the positive effects of cooling U.S. inflation. As well, the S&P 500 is being rebalanced at the close of trading today, promising some wild and woolly trading on the close. It is also options expiration day in New York.

The Toronto stocks being evicted from the S&P 500 are all trading actively today. Alcan is up a little in heavy trading. Barrick has added almost 5% on 2.9 million shares. Nortel Networks is up 4.5% on huge volume of 26.8 million shares. Placer Dome has gained 4%. Inco has added about 3%.

But the isolated strength in these stocks is not enough to overcome some heavy selling in the banks. TD Bank is down almost 4% on more than 1.7 million shares. Royal Bank has lost almost 3%, as has Scotia.

Along with the banks, there’s lots of selling in blue chip names such as Bombardier, down 8%, Rogers is off 6%, and there is heavy selling in Royal Group Technologies, Zarlink, ATI, Ballard Power, Fording, Shaw and Teck.

Acclaim Energy Trust has dropped 6.6% on news that it is buying Ketch Energy for 1.15 Acclaim trust units, representing value of $5.59 per Ketch share. Each Ketch shareholder will also receive one common share in a new company holding their exploration assets. The total value of the Acclaim offer, including assumed debt, is approximately $390 million. Ketch is up 8.5% on the news. Another big seller in the energy group is Husky Energy, down just 0.3%, but on heavy volume.

Apart from the odd exception, the buying is almost all in the gold sector. Following Barrick and Placer, there are big gains in Bema Gold, Glamis, Meridian, Agnico Eagle, and Goldcorp.

In other business news, Wescast Industries is reporting that its net earnings for the quarter were $12.1 million, after reflecting $8.6 million in after-tax charges. Net earnings over the same quarter in 2001 were $17.8 million.

In New York, stocks opened lower, driven down by Sun, and markets have been falling through much of the morning. At midday, the Dow Jones industrial average is down 266 points to 8,144. The S&P 500 has dropped 22 points to 860. The Nasdaq composite index is down 25 points to 1,331.

The small caps are escaping the rash of selling, thanks to strength in golds. The S&P/TSX Venture index is up a single point to 1,101. Volume is on the light side at 13.4 million shares. Photochannel Networks is the top trader, flat at 7¢ on 589,600 shares.