It turns out that yesterday’s rally was as flimsy as the low volume suggested. At midday stocks are selling off on some weak economic news, and ongoing rate fears. The S&P/TSX composite index has dropped 70 points to 8,135.

Canada’s trade surplus for March jumped to $6.2 billion thanks to much stronger exports. Economists attributed the strength to higher commodity prices, trumping the impact of the stronger loonie.

However, in the U.S., the trade deficit widened to a record US$46 billion. Economists are worried that this could hamper first quarter GDP readings.

Toronto volume is a bit stronger today at 125 million shares. The buying action is edging the selling by a margin of about 13:10. Losers outnumber winners by about five to four.

Once again, the selling is broad-based,. The blow is cushioned a bit by the Canadian market’s heavy weighting in golds, which are enjoying a 1.4% safe haven bounce.

Technology shares have dropped 2.4%, miners are down 1.8%, biotechs, telecoms and consumer discretionary stocks are all getting hit hard, too, as are financials.

The banks are taking some heavy blows today, caught in the general selling, speculation that domestic mergers will be delayed to next year, and talk of litigation exposure following Citigroup’s big reserves announcement. TD Bank, Royal Bank and Bank of Montreal are each down 1.3%, CIBC is off by 1.1%, and Scotia is down 2.1%.

Manulife Financial is holding up well amid this, it is more or less flat at midday.

Industrial Alliance reported net income of $36.6-million in the first quarter of 2004, a 29% increase over the first quarter last year.

Other blue chips are lower today, too. BCE is down 1%, Alcan has lost 2.4%, Inco is down 2%, Noranda is off 3% and Petro Canada is 1.7% lower.

Nortel is leading the techs lower with a 2.2% slide. There is also weakness in Research in Motion, Sierra Wireless, ATI and Zarlink Semi. Speculative biotechs are getting thumped, too, with Labopharm down more than 8%, and heavy slides in Cryocath, TLC and ConjuChem, too. WestJet is also weak.

On the upside, gold is the only place to be. Placer Dome is 1.6% higher, as traders seek safety in the precious metal. Meridian Gold has jumped 8% in heavy volume, and there is active buying in Cambior, Metallic Venture Gold, Dundee Precious Metals, and Breakwater Resources.

Oil prices spiked above US$40 again today, boosting the fortunes of some energy firms, including EnCana, Talisman Energy, and Canadian Natural Resources.

Lorus Therapeutics is also a lone standout in biotechs, up almost 7% on news that it has discovered novel compounds with anti-cancer and anti-bacterial properties.

In earnings news, Allstream Inc. reported first quarter net income of $15.4-million. Shareholders approved its proposed acquisition of Manitoba Telecom.

CAE has recorded net earnings for the full year of $64. million. Rio Narcea reported a net loss of $6,411,800, compared with net income of $681,900 in the same period of 2003.

Trizec Canada reported net income of $30.7 million, compared with net income of $59.8 million for the same period last year. SR Telecom had a consolidated net loss of $16.9 million for the quarter, compared with a consolidated net loss of $6.7 million in the corresponding period in 2003.

Cequel Energy Inc. saw net earnings of $11.2 million in its latest quarter.

In other business news, Dundee Wealth Management announced a 5% share buyback.

In the U.S., the latest trade data, rate fears, and geopolitical concerns have pulled stocks lower. The Dow Jones industrial average is off about 1.5%, dropping 146 points at midday to 9,873. The Nasdaq composite index is 2.6% lower at 1,882, with a 50 point loss.

Somehow, Canadian small caps are bucking today’s selloff. The S&P/TSX Venture index is actually up nine points to 1568. Volume remains weak at 21.7 million shares. Spider Resources Inc. is the top trader on the day, down 1.5¢ to 13.5¢ on 862,000 shares.