Accounting worries surrounding Nortel Networks, news of a series of bombings in Madrid, and concerns over economic growth have Toronto stocks lower at midday. The S&P/TSX index is off 49 points at 8,537 level.

This morning’s economic news was generally encouraging. Canadian capacity utilization beat expectations, and U.S. jobless claims and retail sales came out in line with expectations..

Toronto volume is huge, with 224.2 million shares traded. The selling action is more than quadruple the buying, as traders bail out on Nortel in heavy numbers. Market breadth is solidly bearish too, as losers outnumber winners 17:6.

Nortel is certainly the story of the day, taking a huge pounding after reporting it may have to restate its financial statements due to an accounting review. The early reaction was a heavy sell, pushing the stock down as much as 16%. However, Nortel has bounced most of the way back, and is down 3%, with 70.3 million shares changing hands so far.

The weakness in Nortel has the tech group down 1.4%. There is selling in most every other sector.

Only the mining stocks are bucking the trend, as traders look for some bargains in that beaten up group. Otherwise, there is notable weakness in golds, real estate, financials and consumer discretionary stocks.

Elsewhere in the tech and telecom areas, BCE is down 1%. Mitec has dropped 7.6% on word that its net loss for the third quarter was $1.6 million, compared with $4.9 million in fiscal 2003. Certicom is down 5.4%, and there’s weakness in JDS Uniphase, Telesystem International Wireless, Cinram and Rogers Communications.

Maax is also getting a heavy trade, down 1.3% on volume of four million shares on news that it is being taken out by a group of investors, including OMERS, J.W. Childs Associates LP, and Borealis Private Equity LP for about $640 million. Merrill Lynch and National Bank Financial have each provided an opinion for use by the board of Maax that the merger consideration is fair to Maax shareholders from a financial point of view. The board is supporting the deal, and the firm’s president and chief executive officer, Andre Heroux, will stay on in those roles after the completion of this transaction.

Energy stocks are weaker, led by a 1.1% slide for EnCana. There is also some active selling in Talisman Energy and Suncor Energy. The big loser in the group is Canadian Superior Energy, which has dropped 35% on almost six million shares traded on news that it is abandoning one of its exploration projects due to “operational pack ice delays and associated cost and the current overall cost of the well.”

Gods are weak again, too, led by a 1.4% drop in Barrick. Rio Narcea is weak, as is Ivanhoe Mines.

The financials are also slumping today, with Manulife down 1.3%. Bank of Montreal and TD Bank are also sliding, as Royal Bank and CIBC continue to recover.

Air Canada has dropped 7.4%, as it continues to squabble with its unions.

Despite the overall market weakness, some of yesterday’s big losers are seeing strong bounces today. Inco is back up 2%, Alcan has gained 1.7%. There are big gains in Slater Steel, Southern Cross, AltaGas, Cameco and Falconbridge. Canadian Oil Sands Trust continues to recover. Biotechs, TLC Vision and Forbes Medi-Tech are higher.

Nexfor is up almost 5% on news that it intends to divide itself into two companies. The plan is intended to maximize the value of its businesses by creating two distinct and independent companies: a specialty papers and timberlands business; and a wood-based panel board business. The plan will result in the creation of a new, publicly traded company, Fraser Papers. Nexfor’s panel board business, the core of the company’s growth since 1998, will become the sole focus of its management and strategic direction. The company’s name will be changed to Norbord Inc.

In earnings news, Hudson’s Bay Co. reported that its earnings dropped 15% to $69.2 million in 2003, due to weak sales.

NQL Drilling Tools Inc. said that it lost $59.1 million in 2003.

In other business news, Jean Douville was elected chairman of the board of National Bank.

In the U.S., stocks are down on much the same news that’s afflicting Toronto. The Dow Jones industrial has has dropped 24 points to 10,273. The tech-heavy Nasdaq is four points higher at 1,968.