A pumpjack operates at the Inglewood Oil field in Los Angeles.Patrick Fallon/Bloomberg
Resource stocks led the Toronto Stock Market higher, but U.S. stocks sank, sending the S&P's 500 Index to its biggest monthly decline in a year, as weaker-than-forecast economic growth overshadowed a rally in energy shares sparked by a surge in the price of crude.
The Dow Jones industrial average fell 251.9 points to 17,164.95, as Chevron Corp. fell after slashing its drilling budget. The S&P 500 declined 26.26 points to 1,994.99, extending its monthly loss to 3.1 per cent. The Nasdaq composite was off 48.17 points to 4,635.24, even as Amazon.com Inc. and Google Inc. surged.
Energy shares gained 0.7 per cent as U.S. oil surged more than 8 per cent. Amazon.com Inc. and Biogen Idec Inc. soared at least 10 per cent after reporting earnings.
In Toronto, the S&P/TSX composite index added 36.20 points to 14,673.48, led higher by energy shares as oil climbed.
The TSX financial sector was the major weight, down per cent after Barclays Bank downgraded several of the major Canadian banks, saying that "slower than anticipated economic growth will weigh on the earnings growth and valuations of the group."
In addition, data showed an unexpected decline in Canada's economy in November.
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 0.63 of a cent to 78.67 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.
In the U.S., equities tumbled amid concern over economies in Europe and Russia as data showed slower growth in America. 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.
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. "Inflation is low, but not low enough to rationalize zero interest rates. There's a lot of underlying momentum in the U.S. economy."
Strength on the TSX came primarily from the resource sectors with the energy group moving ahead almost five per cent as oil climbed $3.71 to US$48.24 a barrel.
Traders looking for a bottom to the plunge in prices reacted positively to news of a big drop in U.S. rig counts as producers respond to oversupply. Investors also drove up stocks in companies taking strong measures to deal with the drop in prices, including slashing spending plans and in some cases cutting dividends.
A major gainer was Canadian Oil Sands Ltd., which said Thursday that it was slashing its quarterly dividend to five cents a share. It had already announced a cut in the payout in December to 20 cents from 35 cents at a time when oil was about US$67 a barrel. COS shares gained $1 or 14.7 per cent to $7.85.
The base metals sector rose 4.2 per cent as March copper rose four cents to US$2.47 a pound.
The gold sector was ahead four per cent as April bullion gained $23.30 to US$1,279.20 an ounce.
The TSX financial sector was the major weight, down 2.25 per cent after Barclays Bank downgraded several of the major Canadian banks, saying that "slower than anticipated economic growth will weigh on the earnings growth and valuations of the group."
Barclays downgraded the stock of Bank of Montreal, Royal Bank and TD Bank — three of the Big Six — 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.
"If it's not energy, it's the financials that will move the market and right now, investors are concerned rate cuts will squeeze margins," said Scott Vali, vice-president, Canadian equities, CIBC Asset Management.
The TSX finished the week with a gain of 113 points or 0.8 per cent, led by gains in the energy, tech and consumer staples groups. Base metals were the biggest losers as demand concerns continued to push copper down to fresh six-year lows.
The Chicago Board Options Exchange Volatility Index, known as the VIX, jumped 12 percent to 20.97, capping its biggest weekly gain since Dec. 12.
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.
Nine of 10 primary industry groups in the S&P 500 declined, as energy stocks rebounded from a loss to post a 0.7 per cent advance. Utilities paced losses with a decline of 2.2 per cent.
Chevron Corp. fell 0.5 per cent after dropping as much as 4 per cent. 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.
PulteGroup Inc. slid 5.6 per cent as Wells Fargo Securities analyst Adam Rudiger downgraded the stock to market perform from outperform.
Microsoft Corp., Intel Corp. and Cisco Systems Inc. retreated more than 3.1 per cent to pace losses among the biggest companies.
Amazon.com Inc. surged 14 per cent, the most since April 2012, after the online retailer posted a fourth-quarter profit following two straight quarters of losses.
Google Inc. jumped 4.7 per cent even as fourth-quarter sales and profit missed estimates.
Visa Inc., the world's largest payments network, climbed 2.8 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 0.8 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."
Earlier, equities futures fell 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.
With files from The Canadian Press