TSX nears four-week low on Fed fears; turns negative for year

Wed Aug 7, 2013 5:28pm EDT
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By John Tilak

TORONTO (Reuters) - Canada's main stock index tested a four-week low on Wednesday as fresh concerns that the U.S. Federal Reserve might soon begin pulling back on its monetary stimulus program hit shares of financial and energy companies.

The Toronto index, which extended its losses to a second successive session, turned negative for the year. At Wednesday's close, the index was down 0.17 percent for 2013.

Limiting the damage was a jump in the shares of Valeant Pharmaceuticals International Inc (VRX.TO: Quote) after the drugmaker issued an upbeat quarterly report and full-year forecast. [ID:nL4N0G82N0] The stock gained 2.1 percent to close at C$101.70.

A top Fed official said on Tuesday that the U.S. central bank will likely reduce its bond buying later this year, and depending on economic data, could do so as early as next month.

Recent data from the United States has been showing greater stability and growth in the world's largest economy, suggesting to the market that a winding down of Fed stimulus could be imminent.

"Investors are becoming a bit more cautious on the potential that there will be less Fed stimulus in the near term," said Craig Fehr, Canadian market strategist at Edward Jones in St. Louis, Missouri.

"The economy is stable, potentially gaining a little bit of momentum, but it's unlikely to hit its stride in the near term."

Fehr said the market should look beyond the daily chatter and realize that while a Fed pullback will ultimately happen, the timing is less important.   Continued...

People attend a market open ceremony for the Toronto Stock Exchange at the TSX Broadcast Centre in Toronto June 20, 2008. REUTERS/Mark Blinch