TSX tumbles 183 points on U.S. economic concerns

The Canadian dollar was down 0.01 of a cent to 100.97 cents US.

U.S. markets also finished in the red as Fed policy-makers said they are worried that recent strong gains in hiring could fizzle if U.S. economic growth doesn’t pick up. Minutes of the Fed’s March 13 meeting show that members expressed those concerns before sticking with a plan to keep interest rates at record lows until at least late 2014.

The minutes also showed that only a couple of members want to take further steps to boost the economy, such as quantitative easing, which involves the Fed printing more money to buy up bonds.

“So there will be no QE3 (third round of quantitative easing) unless the recovery falters and, even under those circumstances, it is still questionable whether there would be a majority in favour of more action,” said Paul Ashworth, chief U.S. economist for Capital Economics.

The Dow Jones industrial average was down 64.94 points to 13,199.55. The Nasdaq composite index dropped 6.13 points to 3,113.57 and the S&P 500 index was down 5.73 points to 1,413.31.

Stocks had earlier weakened amid a disappointing read on U.S. factory orders. Businesses ordered more machinery and equipment from U.S. factories in February with orders increasing 1.3%, which offset a similar decline in January. But the showing fell short of the 1.5% gain economists had expected.

The Toronto stock market’s solid run-up Monday was triggered by a report that showed U.S. industrial production grew in March at a faster pace than expected while China said that manufacturers also gained momentum. However, manufacturing data from France and Germany weakened, suggesting Europe will likely face a recession this year.

The TSX has fallen for the past four weeks on concerns that the slow but steady pace of the economic recovery is out of sync with the strong gains seen on stock markets since the beginning of October.

“I see a choppy market because our market tends to be a high risk or risk on type of market,” said Allan Small, senior investment adviser with Dundee Wealth, since the TSX is about 50% weighted in materials.

“Is the commodity story still intact? My opinion is, in some cases yes, in others no. Maybe the gold story is coming to a bit of a fizzle. But I think overall, based on the global story, global growth, I am still bullish. I still think this year is going to be good.”

Meanwhile, commodity prices moved mainly lower following Monday’s strong gains.

The energy sector was down 1.62% as the May crude contract on the New York Mercantile Exchange declined $1.22 to US$104.01 a barrel after charging ahead more than US$2. Canadian Natural Resources shed 59 cents to $33.16 while Suncor Energy (TSX:SU) declined 46 cents to $32.74.

The TSX base metals component was down 2.56% with the May copper contract unchanged at US$3.92 a pound after the Chinese data had helped send the metal up a dime on Monday. China is the world’s biggest copper consumer. Ivanhoe Mines (TSX:IVN) fell $1.23 to $14.37 and Inmet Mining (TSX:IMN) dropped $2.32 to $55.40.

The gold sector backed away about 3.7% while the January bullion contract on the Nymex edged $7.70 lower to US$1,672 an ounce. Goldcorp Inc. (TSX:G) faded $2.67 to $43.10 and Barrick Gold Corp. (TSX:ABX) fell $1.33 to $42.53.

There was also major dealmaking on the TSX.

Royal Bank of Canada (TSX:RY) will pay $1.1 billion cash to buy the remaining half of RBC Dexia, an adviser to pension fund managers and institutional investors. The Canadian bank’s partner, formerly called Dexia SA, had indicated months ago it would sell its half of the joint venture.

Meanwhile, RBC is fending off major allegations from a U.S. regulatory agency. The U.S. Commodity Futures Trading Commission accused RBC on Monday of hundreds of millions of dollars in sham trades. The bank calls the allegation absurd, since it sought guidance from the CFTC before making the trades and acted within the agency’s guidelines. Royal Bank shares were down $1.64 to $57.10, helping to send the financial sector down 1.3%.

Molson Coors Brewing Company (NYSE:TAP) (TSX:TPX.A) will pay US$3.5 billion to acquire European brewing giant StarBev, giving the Canadian-American beer maker a new base in Europe and adding more than 20 brands to its portfolio. Denver based Molson Coors shares were down $2.49 to US$43.17 in New York.

Research In Motion (TSX:RIM) was a major decliner. Its shares fell $1.34 or 9.4% to $12.91. The slide in price came amid a report that Google Inc.’s Android operating system was the dominant operating system in the U.S. smartphone market in the three months ended in February. ComScore reported that about 50% used Android, 30% used Apple’s platform and 13% went with Research In Motion.

Air Canada’s (TSX:AC.B) shares dipped two cents to 91 cents after the carrier’s debt rating was lowered by Moody’s Investor Service to Caa1 from B3.