TSX ends lower as GDP growth meets expectations

The TSX lost 0.6% this past week. But it is still up 13% from the most recent lows of last October and 5.75% year to date, reflecting stronger economic data from the U.S. and China and confidence that the European debt crisis is being managed.

“The markets do look overbought,” said Phillip Petursson, director of institutional equities at Manulife Asset Management, adding that investors may see a drop of between four and nine per cent.

“We could be entering a consolidation or a bit of a contraction or correction phase but nothing beyond what would be seen as normal market activity. It’s rest, re-evalute, reposition and look ahead.”

Statistics Canada said the economy expanded at an annualized rate of 1.8% in the October-to-December period. Gross domestic product grew 0.4% in December, which was also in line with expectations.

The Canadian dollar was lower despite the data, down 0.28 of a cent to 101.15 cents US. The currency was pressured by commodity prices which weakened across the board amid a rising American dollar.

A stronger greenback usually helps depress oil prices and other commodities, which are denominated in U.S. dollars, as it makes them more expensive for holders of other currencies.

U.S. markets were modestly lower as the Dow Jones industrials slipped 2.73 points to 12,977.57.

The Nasdaq composite index was down 12.78 points to 2,976.19 and the S&P 500 index dipped 4.46 points to 1,369.63.

The U.S. dollar strengthened after Spain’s prime minister said Friday that his recession-ridden country will miss its deficit goal for this year, risking sanctions from the European Union.

Spain’s government deficit will reach 5.8% of its economic output this year, Prime Minister Mariano Rajoy said after an EU summit in Brussels. That is much higher than the 4.4% Madrid had promised the other states in the 27-country bloc.

The gold sector fell about 1.7% as bullion declined $12.40 to US$1,709.80 an ounce. Bullion has fallen this week amid a growing conviction that the U.S. Federal Reserve likely won’t embark on another round of quantitative easing, which involves the central bank printing money to buy bonds. Barrick Gold Corp. (TSX:ABX) faded 40 cents to C$46.87 while Kinross Gold (TSX:K) fell 34 cents to $10.78.

The base metals sector shed 1.46% while May copper was down three cents to US$3.90 a pound. Teck Resources (TSX:TCK.B) declined $1.04 to C$38.52 and HudBay Minerals (TSX:HBM) fell 23 cents to $11.67.

Oil prices were down with the April contract on the New York Mercantile Exchange falling $2.14 to US$106.70 a barrel.

The TSX energy sector was down 1.36% with Cenovus Energy (TSX:CVE) off 66 cents to C$38.29 and Canadian Natural Resources (TSX:CNQ) fell $1.08 to $36.33.

Higher oil costs have worried investors. Oil has shot up sharply from the US$98 level of the end of January, largely because of concerns of Iran’s nuclear program and worries about supply disruptions. Investors worry that a continued run-up could damage a fragile economic recovery.

Financials also weighed on the TSX, led by losses at the big insurers. Manulife Financial (TSX:MFC) was off 19 cents to $12.45 while Sun Life Financial (TSX:SLF) fell 23 cents to $21.94.

In corporate news, Sears Canada Inc. (TSX:SCC) stock gained 84 cents to $13.04 as it announced plans to close three of its department stores in major Canadian cities, selling back the leases to the landlord for $170 million. The retailer says locations in Vancouver, Calgary and Ottawa will shut their doors by the end of October. The move comes as the retailer works to revamp its struggling Canadian operations.

Power producer TransAlta Corp.’s (TSX:TA) said its fourth-quarter profits were dragged down by a one-time charge, falling to $24 million or 11 cents per share from a year-earlier $92 million or 42 cents per share. Its shares lost 31 cents to $20.49.

Yelp Inc. jumped 63% on its first day of trading in New York. The online review site’s initial public offering valued the company at US$900 million.