Source: The Canadian Press

The Toronto stock market closed well into negative territory Thursday as the U.S. dollar strengthened against other currencies and commodity prices declined.

The S&P/TSX composite index fell 84.32 points to 13,311.67 while the TSX Venture Exchange dropped 45.3 points to 2,217.18.

The Canadian dollar was well off the highs of the session after earlier benefiting from a string of positive American economic developments this week, closing down 0.05 of a cent at 100.31 cents US.

The stronger greenback helped push the February crude oil contract on the New York Mercantile Exchange down $1.92 to US$88.38 a barrel.

Data showing strong job creation and a drop in U.S. crude supplies for a fifth straight week had sent prices higher on Wednesday. The U.S. Energy Department said commercial crude inventories fell 4.2 million barrels, much more than the decrease of 1.6 million barrels expected by analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos.

The energy sector on the TSX lost 1.73%, with Suncor Energy (TSX:SU) down $1.10 at C$37.14 while Canadian Natural Resources (TSX:CNQ) shed $1.34 to $42.95.

The gold sector also backed off as the February bullion contract moved down $2 to US$1,371.70 an ounce. Barrick Gold (TSX:ABX) faded 77 cents to C$49.07 and Goldcorp Inc. (TSX:G) gave back $1 to $42.94.

Gold prices have been moving lower all week in response to positive economic data and a stronger greenback, prompting analysts to warn that other price declines could be in store.

“Gold to us looks to us like it could be quite vulnerable to a near-term correction,” said Kathryn Delgreco, investment adviser at TD Waterhouse.

“If we get a very strong employment number and it’s perceived that the U.S. economy is recovering (and) the U.S. dollar starts to strengthen, there is such a large degree of speculation in gold right now, that it would not be surprising to see gold have 10% correction as a result.”

Delgreco said silver is also particularly vulnerable right now and believes that a selloff in precious metals would spill over into other commodities as well.

The base metals sector was off almost 1% as the March copper contract on the Nymex backed off eight cents to US$4.33 a pound. Teck Resources (TSX:TCK.B) lost 60 cents to C$62.23 while Thompson Creek Metals Co. Inc. (TSX:TCM) shed 42 cents to $14.27.

Investors also took in dealmaking in the mining sector as copper miner Equinox Minerals (TSX:EQN) said it now has a 90.59% stake in Australian-based Citadel Resource Group. Equinox has started a compulsory uptake of the remaining shares in Citadel in a deal valuing the company at about $1.26 billion. Equinox shares dipped 12 cents to $6.06.

And Franco-Nevada Corp. (TSX:FNV) said it has reached a definitive agreement to buy Gold Wheaton Gold Corp. (TSX:GLW) in a cash-and-share deal that values the gold processor at about $851.2 million. Franco Nevada shares were off 32 cents at $31.58 while Gold Wheaton shares were unchanged at $4.99.

Financials also weighed on the TSX with Royal Bank (TSX:RY) down 48 cents at $51.61.

The latest reading on U.S. jobless insurance claims took away some of the optimism heading into Friday’s release of the December non-farm payrolls report.

The U.S. Labour Department said that applications rose by 18,000 to a seasonally adjusted 409,000 in the week ended Jan. 1. Applications had fallen to 391,000 the previous week, the lowest point since July 2008.

Fewer than 425,000 people seeking unemployment benefits signals modest job growth. But economists say such applications need to fall consistently to 375,000 or below to substantially bring down the unemployment rate.

Job growth hopes had strengthened after Automatic Data Processing Inc. reported Wednesday the U.S. economy likely created just under 300,000 jobs last month, almost double what economists have been forecasting.

“I think that ADP data that came out yesterday was very, very strong, very encouraging and I think what we’re starting to see is some very good indications that the U.S. economy is recovering,” Delgreco said.

New York’s Dow Jones industrial average lost 25.58 points to 11,697.31.

The Nasdaq composite index was 7.69 points higher at 2,709.89 and the S&P 500 index was down 2.71 points at 1,273.85.

Reports showing higher than expected expansion in the U.S. manufacturing and service sectors have also encouraged investors this week.

In other corporate news, Nunavut Iron Ore, the private equity fund trying to buy Baffinland Iron Mines Corp. (TSX:BIM) struck a deal late Wednesday with the Ontario Securities Commission to allow its hostile bid to go ahead. The regulator had sought to block the company from making its offer.

Under the agreement Nunavut will amend its plan to issue warrants to shareholders as part of its proposal to increase its stake in the company to 60% from about 10%. Baffinland shares declined a penny to $1.43.

WestJet Airlines Ltd. (TSX:WJA) shares rose 17 cents to $14.47 as the carrier reported that its passenger traffic jumped 10.9% last month, crediting a holiday period that proved busier than in December 2009. However, the airline’s load factor dropped to 80.3%, 1.4 percentage points lower than in December 2009.

Research In Motion Ltd. (TSX:RIM) slipped 50 cents to $61.20 following a 4% rise Wednesday. The company disclosed at the consumer electronics show in Las Vegas that its Playbook tablet will be available in North America by the end of March.