Traders work on the floor of the New York Stock Exchange January 30, 2015.BRENDAN MCDERMID/Reuters
North American stocks fell in midday trading Friday, with the Standard & Poor's 500 Index heading for its biggest monthly decline in a year, amid concern over economies in Europe and Russia as data showed slower growth in America and Canada.
The Dow Jones industrial average fell 129.4 points to 17,287.41, as Chevron Corp. led losses after slashing its drilling budget. The S&P 500 edged down 15.34 points to 2,005.91. The Nasdaq composite was off 11.92 points to 4,671.49, even as Amazon.com Inc. and Google Inc. surged.
In Toronto, the S&P/TSX composite index was off 29.22 points to 14,608.06, amid an unexpected decline in Canada's economy in November and a rating downgrade covering many of Canada's big banks.
Statistics Canada said gross domestic product in November declined 0.2 per cent, worse than the flat showing that economists had expected after a 0.3 per cent increase in October. The agency said the drop extended across major sectors including manufacturing and mining, quarrying, and oil and gas extraction.
Meanwhile, the Canadian dollar plunged to fresh six-year lows on the data, falling 0.50 of a cent to 78.80 cents (U.S.) The loonie has been weighed down by low oil prices and the Bank of Canada's interest rate cut on Wednesday. On Thursday, the loonie lost half a cent to close at 79.3 cents (U.S.), close to its lowest level since early April 2009, adding to the three-quarters of a cent drop on Wednesday.
Stocks fell early on Friday as Russia unexpectedly cut interest rates and prices in Europe plunged at a pace last seen in the depths of the recession in 2009. The U.S. economy expanded at a slower pace than forecast in the fourth quarter as cooling business investment, a slump in government outlays and a widening trade gap took some of the luster off the biggest gain in consumer spending in almost nine years.
"All this data does is further cloud the entire investment picture," Michael James, a Los Angeles-based managing director of equity trading at Wedbush Securities Inc., said in a phone interview. "It confirms that there's going to be continued uncertainty and continued significant volatility."
Gross domestic product grew at a 2.6 per cent annualized rate after a 5 per cent gain in the third quarter that was the fastest since 2003, Commerce Department figures showed Thursday in Washington. The median forecast of 85 economists surveyed by Bloomberg called for a 3 per cent advance. Consumer spending, which accounts for almost 70 per cent of the economy, climbed 4.3 per cent, more than projected.
A separate report showed American consumer confidence reached an 11-year high in January as a strengthening labor market and plunging gas prices kept households looking on the bright side.
On the TSX, the financial sector was the major weight, down two per cent after Barclays Bank downgraded several major Canadian banks, saying even before the StatsCan report that "slower-than-anticipated economic growth will weigh on the earnings growth and valuations of the group."
Barclays downgraded Bank of Montreal, Royal Bank and TD Bank – three of the country's largest banks – plus Quebec-centred Laurentian Bank to underweight from equal weight.
Barclays called last week's surprise quarter-point cut to a key Bank of Canada rate "a net negative" for the banks, adding that "the action from the central bank implies lower economic growth than is currently reflected in the market."
The TSX was also weighed by losses in industrials, consumer staples and utilities.
Strength on the TSX came primarily from the resource sectors with the energy group ahead 1.2 per cent as oil climbed 62 cents to US$45.15 a barrel. Some energy companies have recently slashed spending plans and in some cases cut dividends.
Canadian Oil Sands Ltd. said Thursday that it was decreasing its quarterly dividend to five cents a share. It had already cut the payout in December to 20 cents from 35 cents at a time when oil was about US$67 a barrel. COS shares gained 36 cents or 5.35 per cent to $7.21 after falling seven per cent Thursday.
Canadian Oil Sands also posted quarterly net income of $25-million, down nearly 87 per cent from a year ago. Cash flow from operations fell to $207-million, or 43 cents per share, from $391-million, or 81 cents a share.
The base metals sector rose two per cent while March copper edged up three cents to US$2.47 a pound.
The gold sector was ahead 2.65 per cent while April gold gained $18.50 to US$ 1,273.10 an ounce.
The U.S. Federal Reserve officials are confronting divergent economic forces as they weigh the timing of the first interest– rate increase since 2006. Surprisingly strong job gains argue for tightening sooner, while inflation held down by a plunge in oil prices and a cooling global economy provides grounds for delay.
"In the background of all of these reports is the Fed," Jim Paulsen, chief investment strategist at Wells Capital Management, said by phone. Paulsen helps manage $351-billion in assets. "It's the big elephant in the room in terms of how fast they might raise rates."
The central bank boosted its assessment of the economy in a statement this week and downplayed low inflation readings, while repeating a pledge to remain "patient" on raising interest rates. It acknowledged global risks, saying it will take into account readings on "international developments" as it decides how long to keep rates low.
"Zero interest rates are not the right interest rates for this economy," James Bullard, president of the Fed Bank of St. Louis, said in a Bloomberg Television interview with Betty Liu and Michael McKee. "Inflation is low, but not low enough to rationalize zero interest rates. There's a lot of underlying momentum in the U.S. economy."
Equity futures fell earlier as Russia's central bank unexpectedly cut its benchmark interest rate by two percentage points, letting the ruble slide as the economy sinks toward recession.
Data showed consumer prices in the euro area fell more than economists forecast in January, underscoring the challenges facing European Central Bank President Mario Draghi. The ECB last week unveiled a 1.14 trillion-euro ($1.3-trillion) quantitative-easing program to combat deflation.
The Chicago Board Options Exchange index, known as the VIX, jumped 11 per cent to 20.76.
Companies from Procter & Gamble Co. to DuPont Co. and Pfizer Inc. have said the U.S. currency's strength is hurting profits. The strongest dollar in a decade is making American goods and services more expensive overseas, eroding sales.
About 78 per cent of the S&P 500's more than 220 companies that posted earnings this season have beaten analyst estimates, while 56 per cent have topped sales projections, data compiled by Bloomberg show.
All of the 10 primary industry groups in the S&P 500 declined, with utility, financial, health care, consumer staples, industrial and energy stocks losing more than 1 per cent collectively.
Chevron Corp. lost 3.2 per cent for the biggest drop in the Dow. The energy company slashed its drilling budget by the most in 12 years and said it may delay some shale projects as energy producers around the world hoard cash and curtail ambitions in response to free-falling oil prices.
Microsoft Corp., Intel Corp. and Cisco Systems Inc. also retreated more than 2 per cent to pace losses among the biggest companies.
Amazon.com Inc. surged 12 per cent after the online retailer posted a fourth-quarter profit, following two straight quarters of losses.
Credit Cards Google Inc. jumped 4 per cent even as fourth-quarter sales and profit missed estimates.
Visa Inc., the world's largest payments network, climbed 5.1 per cent as first-quarter profit beat analysts' estimates and the company announced a 4-for-1 stock split. Goldman Sachs Group Inc. is poised to replace Visa as the most heavily weighted component of the Dow after the split.
MasterCard Inc. added 1.1 per cent after profit beat analysts' estimates as customer spending climbed.
Biogen Idec Inc. jumped 10 per cent after the maker of multiple sclerosis drugs made a 2015 profit forecast that surpassed analysts' estimates.
"Certainly GDP was a pretty big miss but in the tech world we've got Amazon and Google higher and in the credit card world we're up," Todd Salamone, senior vice president at Cincinnati-based Schaeffer's Investment Research Inc., said in a phone interview. "Also, the question going forward is whether bad data relieves the market in some way in terms of the Fed remaining on hold longer than expected with rates."
With files from The Canadian Press