North American stocks closed the first quarter of 2004 on a down note, pushed lower by disappointing economic news on both sides of the border.

In Toronto, a rally in gold prices failed to help the markets. The S&P/TSX composite index ended down 36.31 points or 0.42% to 8585.93 on a heavy volume of more than 365 million shares. The TSX Venture exchange managed a gain of 13.22 points or 0.71% to 1873.58. Advancing issues led declining issues on both markets.

In New York, there was red ink across the board. The Dow Jones industrial index fell 24 points or 0.23% to 10357.70, while the S&P 500 composite index was off 0.79 or 0.07% to 1126.21 and the Nasdaq fell 6.4 points or 0.32% to 1994.22.

Rising gold prices kept the Toronto market buoyant throughout much of the day despite data showing the Canadian economy shrank 0.1% in January after a 0.5% increase in December. Analysts had been looking for a rise of 0.1% in January.

Bay Street investors were also focused on a major deal in the Canadian gold sector. Mining firms Wheaton River and Iamgold plan to merge their operations in a nearly $3-billion deal they say will create one of the world’s top-10 gold producers.

That deal and the rising price of bullion helped push the TSX gold sector up 1.36%. Other sectors showing gains were materials, real estate, energy and consumer staples. Information technology led the way down, falling 2.26%; financials were off 0.5% as a group.

Worse-than-expected economic news in the U.S. helped dampen stocks. U.S. factory orders increased by a modest 0.3% last month, compared with a drop of 0.9% in January, way below the 1.5% rebound markets had expected. As well, the Chicago Purchasing Managers Index, a gauge of manufacturing activity in the Midwest, showed continued expansion – but at a slower rate than expected. The index for March fell to 57.6 from 63.6 in February. Economists had forecast the index at 61.5.

Worse, the employment component of the index fell to 49.2 from 54.8 in February, glum news two days before the key U.S. payrolls report for March is released.

Meanwhile, OPEC agreed Wednesday to follow through on a pledge to cut its oil production target by four per cent, starting in April, despite recent high prices of crude. However, the price of crude was down $1.05 Wednesday to US$35.20 a barrel.