Source: The Canadian Press

The Toronto stock market closed little changed after the U.S. Federal Reserve opted to keep its key interest rate unchanged.

At the same time, housing data provided one reason why the Fed feels it has to keep rates at historic lows to help the economy recover.

The S&P/TSX composite index gained 9.56 points to 11,807.5 and the TSX Venture Exchange slipped 2.05 points to 1,455.89 as the Fed didn’t disappoint, but neither did it shed much new light on the economy.

The Fed’s key rate will remain at between zero and 0.25% and it said it would continue to keep rates “exceptionally low for an extended period of time.”

It added that the economic recovery is proceeding and the labour market is improving gradually and that inflation is likely to be subdued for some time.

“The message is that the Fed seems to be staying the course on rates and they will just keep trying to use monetary policy to stimulate their economy because while there is a recovery underway, it’s not a very quick one,” observed Colin Cieszynski, market analyst at CMC Markets Canada.

“And we’re seeing that in things like weak housing and employment data, so because of that it’s more of a tentative, timid recovery and because of that they feel they need to support it.”

Markets had been sluggish prior to the Fed’s mid-afternoon announcement amid data showing that sales of new homes in the U.S. collapsed last month _ another blow to global confidence in the recovery of the world’s biggest economy.

The U.S. Commerce Department reported that sales plunged 33% to the lowest level on record as potential buyers stopped shopping for homes once they could no longer get government incentives.

“What this is suggesting is that more of the house sales got pulled forward into the first part of the year than anybody even imagined,” added Cieszynsky.

Also, Statistics Canada reported that retail sales fell 2% in April following a gain in March. Declines were led by a slide of almost 5% at motor vehicle and parts dealers.

Economists had expected a smaller dip, with estimates ranging from 0.3% to as much as 0.5%, and the Canadian dollar was down 0.89 of a cent to 96.28 cents US following the report.

Meanwhile, economists suggested that there could be further weakness in retail sales during the rest of the year.

“Prospects for consumer-oriented retail sector are less bright for the second half of 2010, and especially in the areas supplying housing and other big-ticket durable goods,” said TD Bank deputy chief economist Derek Burleton.

“The race to beat out low interest rates earlier this year has probably brought sales forward from the future and sapped pent-up demand. With many consumers now facing heavy debt-loads and with interest rates on a gradual upward path, household purse strings will likely be tightened.”

The TSX got support from market heavyweight Research In Motion Ltd. (TSX:RIM) a day before the BlackBerry maker issues its latest earnings. Its shares rose $1.58 to $62.01 on expectations that RIM’s profits grew about 33% during the quarter as demand for smart phones continued to surge.

The gold sector was also a source of strength, even as bullion prices headed lower with the August contract in New York down $6 to US$1,234.80 an ounce. Goldcorp Inc. (TSX:G) rose $1.26 to C$46.41 and Barrick Gold (TSX:ABX) ran ahead 44 cents to $46.46.

The financial sector was the biggest TSX drag, down 0.88% as Royal Bank (TSX:RY) eased 66 cents to $53.75 and Bank of Montreal (TSX:BMO) lost 69 cents to $61.76.

The energy sector drifted 0.07% higher as crude oil declined despite a forecast from the International Energy Agency that world oil demand will grow faster than expected through 2015 due to stronger economic growth, particularly in developing countries such as China and India.

The August crude contract on the New York Mercantile Exchange stepped back $1.50 to US$76.35 a barrel. Suncor Energy (TSX:SU) gained 31 cents to $34.04.

The base metals sector was ahead 1.24% as the July copper contract on the Nymex slipped six cents to US$2.94 a pound. Quadra FNX Mining (TSX:QUX) gave back 19 cents to $10.35 while Equinox Minerals (TSX:EQN) gained nine cents to $4.08.

HudBay Minerals Inc. (TSX:HBM) rose 21 cents to C$12.76 after it said that additional gold and copper discoveries at the Lalor deposit near Snow Lake, Man., reinforce confidence in its flagship growth project, which will be moving into a new phase later this year. HudBay, which has identified Lalor as its major growth initiative, said drilling has found notable amounts of gold, silver, copper and zinc in areas beyond previously identified zones.

New York markets were mixed with the Dow Jones industrials up 4.92 points to 10,298.44.

The Nasdaq composite index was down 7.57 points to 2,254.23 and the S&P 500 index was down 3.27 points to 1,092.04.

In other corporate news, an Ontario court judge has approved a revised agreement between Canwest and Shaw Communications (TSX:SJR.B). Canwest agreed in May to sell its Global TV and specialty channel operations to Shaw for about $2 billion but a group of shareholders of the company had opposed the transaction. Under a revised agreement, Shaw will pay US$440 million to Canwest shareholders. Shaw shares gained two cents to $19.64.

AGF Management Ltd. (TSX:AGF.B) reported that second quarter profits rose nearly 60% to $27.5 million from $17.2 million a year ago while revenues increased 7.2% to $153.8 million. Its shares rose five cents to $14.77.

Shares in Pacific Rubiales Energy Corp. (TSX:PRE), a Toronto-headquartered company focused on natural gas and heavy crude oil in Colombia and northern Peru, were unchanged at $24.41 after it was awarded six new land blocks in Colombia. The six include three awarded to a joint venture between subsidiaries of the company and Talisman Energy Inc. (TSX:TSM).

Petrominerales Ltd. (TSX:PMG) has been awarded more two blocks in Colombia’s Llano Basin in return for commitments to spend $24.2 million over three years on exploration activities. The company, which is 66% owned by Petrobank Energy and Resources Ltd. (TSX:PBG), now has 17 exploration blocks in Colombia and five in Peru. Petrominerales shares declined 20 cents to $26.60.