January 7, 2009 / 10:17 PM / 9 years ago

CANADA STOCKS-TSX falls hard on oil price, profit-taking

* All 10 of the TSX’s main sectors end lower

* Commodity-related issues sag with oil, gold prices

* U.S. jobs data boosts fears of extended recession (Updates with closing figures, adds details and comments)

By Ka Yan Ng

TORONTO, Jan 7 (Reuters) - Toronto’s main stock index dropped 3.7 percent on Wednesday as oil and gold shares slid with commodity prices and profit-taking set in after six sessions of gains.

Startling job losses in the United States and a warning from tech bellwether Intel Corp (INTC.O) added to the gloomy investor sentiment and heightened fears of an extended recession.

The energy sector slid 6.14 percent as the price of oil slumped nearly $6 a barrel to settle at $42.63 after a U.S. government inventory report showed supplies rose more than expected. Canadian Natural Resources (CNQ.TO), the index’s biggest mover, fell 8.3 percent to C$51.32. EnCana (ECA.TO) lost 5 percent to C$57.80.

“Oil by far was the biggest negative. People were looking for inventories to build, but they built a lot more than expectations and that’s why the price of oil has come down,” said Ian Nakamoto, director of research at MacDougall, MacDougall & MacTier.

“But the price of oil has rallied a fair bit also in the last two or three weeks.”

The Toronto Stock Exchange’s S&P/TSX composite index .GSPTSE finished down 3.7 percent, or 350.77 points, at 9,121.32. All 10 main groups were in the red.

The index was ripe for a selloff after six consecutive sessions of strong gains. The heavyweight groups, energy, financials and materials, have enjoyed strong gains since the end of 2008, and the momentum helped lift the overall index to a two-month high in the first few trading days of 2009.

“We basically rallied 13 percent in six consecutive sessions, so a bit of pullback and profit-taking is normal -- and a good breather,” said Francis Campeau, a broker at MF Global Canada in Montreal.

The financial sector fell 2.5 percent, led lower by Manulife (MFC.TO) and Royal Bank of Canada (RY.TO). Manulife, Canada’s biggest insurer, fell 5.3 percent to C$22.83, while Royal, the country’s biggest bank, lost 2.5 percent to C$37.10.

Gold-mining issues fell with the price of bullion, which slipped more than 3 percent. That weighed on the broader materials group, which dropped 5.7 percent. Barrick Gold (ABX.TO) was down 6.2 percent at C$37.34.

MORE BAD NEWS EXPECTED

The TSX has been able to shrug off gloomy economic data in recent sessions, partly on hopes for big economic stimulus packages from Canada and other western governments.

But the spectre of deep job losses poses a further threat to fragile consumer confidence and the TSX suffered its first decline this year.

U.S. private-sector employers shed 693,000 jobs in December, a report by ADP Employer Services showed, suggesting more dire news to come in U.S. government jobs data due on Friday. [ID:nN07472855]

Canadian employment figures for December are also due on Friday and and are to show the economy shed some 22,000 jobs. It will also likely underscore economists’ forecasts that the economy is in for a rough ride through the first half of the year and will see little or no growth in 2009 as the recession takes hold. [ID:nN07496502]

Rogers Communications Inc (RCIb.TO) extended losses for a second day, down 2.94 percent at C$33.97, after an analyst downgraded the stock following the release of weaker than expected cable-TV subscriber results. [ID:nN07479276]

“Reality has to set in. You can’t just keep lifting the market and ignoring the bad news,” Nakamoto said.

“We’ll see what happens when the earnings start getting reported. I think earnings are going to be worse than what people are expecting.”

$1=$1.20 Canadian Reporting by Ka Yan Ng; editing by Rob Wilson

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