TSX down, indexes whipsawed by uncertainty over fiscal cliff negotiations

TORONTO - The Toronto stock market was slightly lower for a third session Wednesday as traders weighed comments from U.S. politicians about the pace of budget negotiations aimed at heading off a fiscal crisis in the United States.

The S&P/TSX composite index was well off early, triple-digit declines but still down 17.74 points at late-morning to 12,093.89 with weakness spread across most sectors. The TSX Venture Exchange dipped 3.37 points to 1,202.8.

The Canadian dollar shook off early losses to rise 0.17 of a cent to 100.7 cents US.

New York indexes also erased early lows as the Dow Jones industrials gained 25 points to 12,903.13.

The Nasdaq inched up 0.25 of a point to 2,968.05 while the S&P 500 index added 0.59 of a point to 1,399.53.

Markets stepped back from the worst levels of the morning after House Speaker John Boehner said he was optimistic that a deal can be reached with President Barack Obama to avert the so-called fiscal cliff at the end of next month.

Economists say the combination of steep tax increases and spending cuts would significantly cut economic growth and likely push the U.S. back into recession and damage other economies around the world.

North American markets had extended the losses from Tuesday, which had been triggered by comments from Senate Majority Leader Harry Reid. He said there had been "little progress" in talks to avoid going over the fiscal cliff.

Obama is meeting with corporate executives at the White House on Wednesday and then travelling to Pennsylvania on Friday to push his campaign for upper income bracket earners to pay higher tax rates.

But he is not meeting with congressional leaders until next week.

Still, analysts questioned whether a comprehensive deal can be reached this late in the year.

"I think people who anticipate a resolution prior to year-end are being very optimistic because just right off the bat, many of the legislators don’t really see themselves as having mandate since they have been defeated," said Norman Raschkowan, North American strategist at Mackenzie Financial Corp.

"The most likely case is that they establish the framework for an agreement and they announce sort of the bare bones of that framework prior to year-end with the expectation that by the end of January or early February, a detailed plan would be put in place."

Commodity prices fell as the U.S. dollar strengthened.

The gold sector led decliners, down almost one per cent as December gold on the New York Mercantile Exchange dropped $28.2 to US$1,714.10 an ounce. Goldcorp Inc. (TSX:G) faded 50 cents to C$38.45 while Barrick Gold (TSX:ABX.TO - News) gave back 35 cents to $34.05.

The mining sector lost 0.72 per cent as December copper declined three cents to US$3.51 a pound. Thompson Creek Metals (TSX:TCM.TO - News) shed seven cents to C$2.60 while HudBay Minerals (TSX:HBM.TO - News) declined 11 cents to $9.24.

The tech sector was down 0.67 per cent but Research In Motion Ltd. (TSX:RIM.TO - News)(Nasdaq:RIMM - News) shares turned positive, up 13 cents to $10.83. The stock had been lower amid word that it had lost a contract dispute over the use of Nokia patents. A Swedish arbitrator has ruled that RIM breached a contract between the companies and is not entitled to manufacture or sell wireless local access network (WLAN) products without first reaching a royalties agreement with Nokia.

Its stock fell 10 per cent Tuesday after soaring more than 25 per cent over the previous six sessions on a variety of analyst upgrades and optimism about the launch of its new BlackBerry 10 operating system in January. The drop came following a report that BlackBerry's market share in the U.S. fell to 1.6 per cent in the 12-week period ended Oct. 28, compared with 8.5 per cent in the three-months ended in October 2011.

Elsewhere in the tech sector, CGI Group Inc. (TSX:GIB-A.TO - News) posted a net loss of just under $170 million or 58 cents per diluted share in the latest quarter, compared with a profit of $69.6 million or 26 cents per share in the year-earlier period. Revenue rose to $1.61 billion from just over $1 billion in the fiscal 2011 quarter. Ex-items, the company said it would have had net earnings of $100 million or 37 cents per share, down from 39 cents per share a year earlier. CGI shares slipped 52 cents to $23.53.

January crude dropped 80 cents to US$86.38 a barrel and the energy sector dropped 0.54 per cent. Suncor Energy (TSX:SU.TO - News) fell 55 cents to C$32.34.

Imperial Oil (TSX:IMO.TO - News) shares declined 20 cents to $42.31 as it said it will invest $1.55 billion to acquire a half interest in the assets of Celtic Exploration Ltd. (TSX:CLT.TO - News). The Calgary-based company is currently in the process of being fully acquired by Imperial parent ExxonMobil Canada Ltd., which announced a $3.1-billion bid for Celtic in October. Celtic shares were unchanged at $26.

In other corporate news, Costco Wholesale Corp. shares ran up 4.64 per cent to US$100.99 in New York as the company said it will pay a special dividend of $7 per share next month in addition to the regular quarterly dividend the wholesale club operator pays shareholders.

Many U.S. companies are making special end-of-year dividend payments or moving up their quarterly payouts because investors may have to pay higher taxes on dividend income starting in January.

There was also data that showed that U.S. sales of new homes dipped 0.3 per cent in October to a seasonally adjusted annual rate of 368,000, below expectations of 382,000. Also,the September sales pace was slower than initially thought. Still, house sales are 20.4 per cent higher than the same month last year, supporting other data that show the housing market recovering.