The Toronto stock market turned sharply lower Friday afternoon as nervous investors sold off stocks ahead of the Thanksgiving Day long weekend, despite data showing modest job creation in Canada and the United States last month.
The S&P/TSX composite index dipped 191.71 points, or 1.6%, to close the day and week at 11,588.36, as investors cashed in some profits from two days of strong gains that pushed the TSX up about 600 points
The Canadian dollar slipped 0.08 cents to 96.31 cents U.S.
Canadian Natural Resources lost 98 cents to $30.49 while Imperial Oil shed 70 cents to $38.19.
The base metals sector lost even as copper prices also rallied for a second day on signs of increased demand from China with the December contract up four cents to $3.29 U.S. after jumping 14 cents on Thursday. Sector heavyweight Teck Resources fell $1.63 to $33.69 while HudBay Minerals lost 41 cents to $10.59.
Gold stocks also fell as Barrick Gold Corp. fell $1.05 to $48.53 while Goldcorp Inc. faded $1.04 to $48.20.
Tech stocks were a weight with Research In Motion down $1.20 to $24.20.
In corporate news, energy producer Enbridge Inc. has agreed to become a majority owner of the Cabin Gas Plant in British Columbia for $250 million. The Calgary-based energy producer said it would pick up a 57.6% stake from Encana Corp. and other co-owners of the property.
Enbridge shares were ahead 29 cents at $33.43 and EnCana lost 93 cents to $19.72.
Economically speaking, a whopping 60,900 new jobs, far more than expected, helped slice Canada's unemployment rate to 7.1% in September, boosting its currency and virtually ensuring the central bank won't cut rates any time soon.
Beyond the jobs figures, investors continued to digest developments in Europe’s debt crisis amid another sign the banking sector faces renewed stress.
A dozen British banks have had their credit ratings downgraded by Moody’s Investors Services over doubts about the strength of the government’s support.
While the agency believes that the British government will continue to provide some support to systemically important financial institutions, it said it is more likely to allow smaller institutions to fail.
Moody’s insists that its downgrades have nothing to do with any worsening in the financial strength of the sector or over the state of the government’s public finances as economic growth stalls.
A near standstill in growth prompted the Bank of England yesterday to launch a 75-billion-pound monetary stimulus.
ON BAYSTREET
The TSX Venture Exchange faded 7.69 to 1,472.50, while the Nasdaq Canada index slid 12.47 points to 435.37
All but one of the 14 Toronto subgroups ended the day lower. Metals and mining suffered 3.8%, materials doffed 2.6%, and gold closed 2.2% off Thursday’s finish.
The lone gainer was the telecoms group, up 0.4%.
ON WALLSTREET
In New York, stocks were mixed Friday as investors weighed a better-than-expected report on the U.S. job market against ongoing concerns about the European debt crisis.
The Dow Jones Industrials fell into the red 20.21 points, ending the day at 11,103.10.
The S&P 500 eased 9.51 points to 1,155.46, while the Nasdaq gave back 27.47 points to 2,479.35
Stocks had opened higher after the U.S. government said employers added 103,000 jobs in September, much more than expected.
But concerns about the debt crisis in Europe were thrust back into the spotlight after Fitch cut its credit ratings for Italy and Spain.
Fitch downgraded Italy's long-term default rating one notch to A+, saying the intensifying euro-zone debt crisis "constitutes a significant financial and economic shock which has weakened Italy's sovereign risk profile."
The ratings agency also cut is default rating for Spain two notches to AA+. Fitch said the downgrade reflects Spain's fiscal position and dim economic outlook, as well as the broader debt crisis.
The outlook for both nations is negative, said Fitch.
In addition, Moody's downgraded 12 U.K. financial institutions Friday, warning that some smaller banks may be allowed to fail.
The employment report provided "some reason to be cautiously optimistic," said Larson, who added that "the selling accelerated after the headlines from Fitch."
The ratings action was not a surprise. Italy has already been downgraded recently by Moody's and Standard & Poor's. "Nonetheless, the market is responding," said Larson.
Shares of financial institutions were among the hardest hit. Bank of America, JPMorgan, Citigroup, Morgan Stanley, Goldman Sachs fell between 2% and 6%.
Investors gravitated toward defensive stocks in the health care and consumer staples sectors. Pfizer, Merck, Johnson & Johnson and Walmart were all higher.
Shares of biotech firm Illumina tumbled 31%, making it the biggest drag on the Nasdaq. Late Thursday, the company sharply cut its revenue outlook and several analysts cut their ratings on Illumina early Friday.
Other biotechs followed suit, with shares of Life Technologies, Qiagen, Thermo Fisher Scientific and Affymetrix all down between 4% and 6%.
Sprint shares fell 12%, reversing an earlier rally. The telecom company begins taking preorders for the latest version of Apple's iPhone Friday
Economically speaking, the U.S. economy gained 103,000 jobs last month, while the unemployment rate held steady at 9.1%.
A survey of 22 economists had forecast that the U.S. economy added 65,000 jobs in September, with the unemployment rate expected to remain unchanged at 9.1%.
Investors are worried about the economy heading into another recession if the labour situation doesn't start to show marked improvement.
And while Friday's report was better than expected, the pace of job creation remains and far below levels required for a recovery.
The price on the benchmark 10-year U.S. Treasury fell, driving the yield up to 2.07% from 1.99% late Thursday. Treasury prices and yields move in opposite directions.
Oil for October delivery strengthened 67 cents to $83.26 U.S. a barrel.
Gold futures for December delivery eased 80 cents to $1,652.40 U.S. an ounce
