CANADA STOCKS-TSX drops on resource selloff but golds rise

Wed Jan 19, 2011 5:06pm EST
 
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 * TSX falls 0.89 percent to end at 13,439.04
 * Materials, energy each fall more than 1 percent
 * Pullback now would be healthy, analysts say
 (Updates with details)
 By Ka Yan Ng
 TORONTO, Jan 19 (Reuters) - Toronto's main stock index fell
hard on Wednesday, weighed down by slumping commodity prices as
well as unexpectedly weak North American economic data and by
results from Goldman Sachs (GS.N: Quote)that disappointed the market.
 Copper prices retreated after hitting a record high, while
U.S. crude oil prices eased for a second day. But the price of
bullion rose for a third day. [MET/L][O/R][GOL/]
 "The euphoria that we've seen in the rise of these
commodity prices may have been an overreaction to some of that
news (about global demand)," said Barry Schwartz, vice
president and portfolio manager at Baskin Financial Services.
 "In the meantime, you're going to have these bumps in the
road in terms of pricing."    
 Key decliners on the resource-heavy index included Potash
Corp (POT.TO: Quote), down 3.66 percent at C$166.21, while Suncor
Energy (SU.TO: Quote) dropped 2.37 percent to C$37.87, and Talisman
Energy TLM.TO fell 3.91 percent to C$22.10.
 Teck Resources (TCKb.TO: Quote) lost 2.32 percent to C$62.36 after
it said that adverse weather and a rail traffic disruption
would hold back its first-quarter coal sales. [ID:nN19209662]
 Blue-chip advancers included several gold miners, including
Kinross Gold (K.TO: Quote), up 1.08 percent at C$16.88, and
Agnico-Eagle (AEM.TO: Quote), up 0.23 percent at C$69.65.
 Nine of the index's 10 main sectors were lower, with the
heavily weighted energy and materials groups both down more
than 1 percent.
 The Toronto Stock Exchange's S&P/TSX composite index
.GSPTSE dropped 120.16 points, or 0.89 percent, to finish at
13,439.04.
 The decline unwound the advance on Tuesday, when the index
shot to its highest point since early September 2008. The
S&P/TSX composite has climbed steadily since last summer
without many interruptions, though it is still well off its
pre-financial crisis peak above 15,000.
 "This market is due for a pullback and it's doing it a
little bit today," said Levente Mady, market strategist at
Union Securities in Vancouver. "It'll be interesting to see
which way we lean tomorrow, whether we're just going to be a
one-day wonder or something a little more substantial."
 But he also noted recent put-and-call options activity as a
sign of investor sentiment. Investors buy calls when they
expect the market to rise, and puts when predicting a decline.
 "People have been buying way more calls in the past little
while than puts, so it's another sign of people being overly
exuberant, thinking this rally is just going to continue on
forever," he said, estimating there have been almost twice as
many calls to puts recently.
 Schwartz said that a pullback would be "healthy" at this
time.
 "This is a time for people to sit back and reflect on the
risks going forward and as well as how well the markets have
performed over time in the past six, seven months," he said.
 "Specifically gold, oil, those things in our minds have
topped out in the interim."
 The index's hefty financials group fell 0.53 percent,
weighed down by a drop in quarterly profit at Goldman Sachs
Group, denting market optimism about a strong earnings season.
[ID:nN18199881]
 Toronto-Dominion Bank (TD.TO: Quote) fell 0.55 percent to C$76.10,
while Bank of Nova Scotia (BNS.TO: Quote) declined 0.83 percent to
C$56.37.
 U.S. housing starts and Canadian manufacturing sales data
for November fell well below expectations, bruising sentiment
toward economic recovery.
 In individual company news, Viterra VT.TO shares hit a
14-month high after quarterly earnings at the Canadian grain
handler surpassed expectations. Viterra finished up more than 5
percent at C$11.07. [ID:nN18136120]
 ($1=$1.00 Canadian)
 (Additional reporting by Solarina Ho; editing by Peter
Galloway)