TSX steps back after large gain

Losses in the base metals, materials and gold sectors were the biggest drag on the commodity-heavy TSX, while energy and financials stocks led gainers.

Toronto-Dominion Bank’s profit beat analyst expectations Thursday, wrapping up a quarter in which all of Canada’s big lenders reported higher than anticipated earnings, helped by stronger trading revenues and moderating loan losses. TD, Canadian Imperial Bank of Commerce, Bank of Nova Scotia, Bank of Montreal and Royal Bank of Canada earned $10.46 billion during the quarter.

“Financials have done well,” said Andrew Pyle, a senior adviser and portfolio manager at Scotia Wealth Management. “But even there the banks are facing uncertainty in terms of what happens to the economy over the remainder of this year.”

While fresh numbers from Statistics Canada showed Thursday the economy closed out last year with unexpectedly strong growth at an annual rate of 2.6%, concern has spread through Corporate Canada and Ottawa over the effects of possible taxation and trade changes under U.S. President Donald Trump.

“We were experiencing declines last week when we were getting good earnings coming out of the banks,” Pyle said. “I think the Toronto Stock Exchange may be a little of a precursor for what we might expect coming out of the U.S.”

In New York, major indices also backtracked from Wednesday’s rally. The Dow Jones industrial average fell 112.58 points at 21,002.97, the S&P 500 declined 14.04 points at 2,381.92, and the Nasdaq composite lost 42.81 points at 5,861.22.

“To some extent we’re in uncharted territory and uncharted territory unfortunately also brings with it uncertainty,” said Pyle.

“The problem we’ve got is the market is high on enthusiasm and shy on details, simply meaning everyone is pumped up on the possibility for improved economic growth in the U.S. because of policies that have been proposed out of Washington and that has driven a lot of equities higher.

“At some point the market could become impatient in waiting for those details. And you might be seeing a glimpse of that today but I think the real risk is if we go out a couple more months and there’s still not a lot of concrete evidence as to what’s going to happen on the policy front.”

Pyle added that the growing number of U.S. Federal Reserve officials this week indicating America’s central banking system may raise its key interest rate in March could have also contributed to Thursday’s market movements.

Until recently, financial markets had put a low probability on a March rate hike. That was based on the belief that Fed officials would want to see the size of Trump’s economic stimulus program and would prefer to wait until June when more was known about his plans and the chances that Congress will adopt his program of tax cuts and increased spending on the military and infrastructure projects.

In currencies, the Canadian dollar continued its recent slide, falling to US74.63¢, down US0.36¢ from Wednesday’s close.

The April crude contract was down US$1.22 at US$52.61 per barrel and April natural gas gained half a cent at US$2.80 per mmBTU.

April gold shed US$17.10 at US$1,232.90 an ounce and May copper fell US5¢ to US$2.69 a pound.