Source: The Canadian Press

The Toronto stock market lost ground Tuesday amid weakening commodity prices and mixed earnings reports from U.S. and Canadian companies.

The S&P/TSX composite index dropped 87.95 points to 13,259.63, with all but the real estate index closing in the red.

The TSX Venture Exchange fell 45.88 points to 2,202.72.

The Canadian dollar lost 0.30 of a cent to 100.24 cents US on lower commodity prices and data that showed inflation has been weaker than expected.

Oil fell $1.68 to US$86.19 a barrel on speculation that Saudi Arabia and other OPEC countries will step up production, along with India’s decision to raise interest rates, a move that could slow demand.

The price of oil has fallen 4% since Thursday, when it neared US$92 a barrel. The energy sector lost 1.5% with shares in Suncor Energy (TSX:SU) down 67 cents at C$37.61.

The February gold contract also slid in trading on the New York Mercantile Exchange, falling $12.20 to US$1,332.30 an ounce. On the TSX, shares of Kinross Gold Corp. (TSX:K) lost 28 cents to C$16.25.

The March copper contract was down 13 cents at US$4.21 a pound. Shares in base metals miner Teck Resources Ltd. (TSX:TCK.B) fell 69 cents to C$59.10.

Don Reed, president and CEO at Franklin Templeton Investments Corp., said that while lower commodity prices are taking a big toll on the Toronto market, lower gold prices are a double edged sword because they signal more confidence in improving global market conditions.

“One of the weaker markets so far this year, which has been one of the strongest for the past three years, is the market here in Canada,” he said.

The TSX is down 1% on the year, whereas the world index has gained over 2%, a signal that investors are taking profits from Canadian companies and moving their money to other markets, Reed said.

“I don’t look at that as a disaster for Canada,” he said. “I just think people are saying ‘Hey, we had some great moves in Canada over the last number of years and now it’s time to look and see where we can find some good bargains’ and to me that’s places like Europe and Asia.”

In corporate news, Canadian National Railway (TSX:CNR) has boosted its quarterly dividend by 20% after posting a 12% jump in fourth-quarter revenue to $2.1 billion. Profit was $503 million or $1.08 per share — down from $1.23 per share in the same period a year earlier, when CN recorded two special items and revenue of $1.9 billion. CN shares fell 74 cents to $67.71.

Supermarket giant Metro Inc. (TSX:MRU.A) reported first-quarter net earnings, before adjustments, dropped 6.2% to $92 million, or 88 cents per share, compared with $98.1 million, or 91 cents a share, in the same period last year. Sales at Metro’s grocery stores fell by half a per cent to $2.63 billion from $2.65 billion. Shares in the company fell 52 cents to $43.62.

The International Monetary Fund downgraded Canada’s 2011 growth forecast late Monday. The Washington-based body said Canada’s economy will grow a modest 2.3% in 2011. That’s less than the 2.7% that it forecast in October and below the Bank of Canada’s recently reduced forecast of 2.4% growth.

Canadian investors also digested Statistics Canada data released Tuesday that showed Canada’s overall inflation rate rose to 2.4% in December. But stripping away volatile items, particularly a 13% boost in gasoline prices, yielded a core rate of 1.5%, well within the Bank of Canada’s target range of 1.0 to 3.0%.

The Conference Board of Canada reported that consumer confidence was up 7.1 points in January from last month.

U.S. stock markets were flat as investors sifted through mostly weak earnings from major U.S. companies.

The Dow Jones industrial average fell 3.3 points to 11,977.19, the Nasdaq gained 1.7 points to 2,719.25 and the Standard & Poor’s 500 gained 0.34 points to 1,291.18.

Four of the 30 companies on the Dow Jones reported results before the market opened: DuPont, 3M Co., Verizon Communications Inc. and Johnson & Johnson.

3M lost 2.6% after the manufacturing company’s income fell because of higher costs. Johnson & Johnson lost 1.8% after reporting a 12% drop in income. DuPont’s income fell but still beat expectations and its stock rose 0.2%, while Verizon stock was up 1.6% after reporting earnings were sharply higher.

After markets closed Yahoo Inc. (Nasdaq:YHOO) reported earnings of $312 million, or 24 cents per share, in the October-December period. That compares with net income of $153 million, or 11 cents per share, at the same time in 2009. Revenue dropped 12% from the prior year to $1.53 billion. It’s stock, which closed down seven cents at US$16.02, fell an additional 49 cents to $15.53 in early after-hours trading.

Investors were looking ahead to President Barack Obama’s State of the Union address Tuesday night, during which he was expected to call for a five-year freeze in non-security, discretionary spending.