TORONTO (Reuters) - Canada's main stock index fell on Friday due to a drop in shares of gold and energy producers, but the U.S. Federal Reserve's support for monetary stimulus helped the index posted its biggest weekly gain in more than seven months.
The Toronto market eased after recording gains in the previous four sessions and hitting a one-month high earlier in the day. It still ended the week up 2.7 percent.
Investors also processed mixed U.S. earnings reports, as well as data showing U.S. consumer sentiment took a hit in early July and wholesale prices rose.
Federal Reserve Chairman Ben Bernanke said on Wednesday that the U.S. central bank must keep a stimulative monetary policy in place due to weak to inflation levels and a high unemployment rate.
That sparked a rally in global equity markets and caused a 1.5 percent jump in Toronto stocks on Thursday.
"What Bernanke is trying to do this time, by floating trial balloons and then backpedaling, is making sure this is an orderly process and not a big market crash," said Colin Cieszynski, senior market analyst at CMC Markets.
"He was saying, ‘Don't confuse us taking the foot off the gas pedal with putting the foot on the brake'," he added.
The Toronto Stock Exchange's S&P/TSX composite index .GSPTSE closed down 31.08 points, or 0.25 percent, at 12,462.18.
The global economic recovery needs to gain momentum before sentiment for Canadian equities returns, Cieszynski said. "You would think at some point the Canadian indices would have room to recover, but it may take a little longer before we go higher."
Five of the 10 main sectors on the index were in the red on Friday.
Energy shares lost 0.5 percent, failing to benefit from a jump in the price of oil. <O/R>
The materials group, which includes mining stocks, was the worst performer among the major sectors and gave back 1 percent. A lower bullion price took gold producers down 2.5 percent.
Barrick Gold Corp (ABX.TO) fell 2.3 percent to C$15.49, and Goldcorp was down 1.8 percent at C$26.72.
"People are worried any further declines in commodity prices could have an effect on those companies and industries," said Michael Sprung, president of Sprung Investment Management.
The valuations of material stocks are becoming more appealing, he added. Investors need to "find the ones that have the financial wherewithal to survive a prolonged period of low prices."
Financials, the index's most heavily weighted sector, were a little changed.
Royal Bank of Canada (RY.TO), the country's biggest lender, added 0.3 percent to C$61.80.
In company news, Bank of Nova Scotia (BNS.TO) withdrew its application to acquire a nearly 20 percent stake in Bank of Guangzhou after Chinese authorities decided against proceeding with the C$719 million ($691.28 million) deal. Shares of Scotiabank gained 0.2 percent to C$57.05.