August 11, 2009 / 3:27 PM / in 8 years

CANADA STOCKS-TSX falls on profit-taking but golds shine

* TSX falls 0.95 percent to 10,691.20

* Financials heaviest decliner, off 1.8 percent

* Gold mining shares bright spot as price of metal gains (Adds details)

By Ka Yan Ng

TORONTO, Aug 11 (Reuters) - Toronto’s main stock index was lower on Tuesday morning as a second day of profit-taking hit nearly all its sectors, with the hefty financial group leading the retreat, hurt by several downgrades to U.S. banks.

Of the index’s 12 biggest heavyweight losers, nine were in the financial sector, which makes up about a third of the index’s weighting.

Toronto-Dominion Bank (TD.TO) led the pack with a 1.85 percent drop to C$62.05, while Bank of Nova Scotia (BNS.TO) followed with a 2 percent fall to C$44.56. Insurer Manulife Financial (MFC.TO) dropped 1.5 percent to C$22.22.

U.S. stocks were weighed down on Tuesday by data that showed inventories at wholesalers dropped in June, while downgrades on U.S. banks prompted investors to sell shares in the financial sector. [ID:nN11519108]

Profit-taking took hold on the Toronto market on Monday with index losing 0.84 percent. The fall came after four straight weeks of gains and after the financial group had nearly doubled since hitting a March low and the overall index had gained more than 40 percent in the same period.

“I think we’ve got people taking profits after the run that we’ve seen. This market went up pretty rapidly,” said Michael Sprung, president at Sprung & Co Investment Counsel.

“People are beginning to, I think, seriously question the speed of the recovery if in fact we are in the recovery. They’re coming to realize that this might be a long and protracted process.”

Adding to the down mood, Canadian data on Tuesday showed housing starts broke a two-month run of gains with an unexpected 4.1 percent drop in July from June. [ID:nN11509601]

At 10:45 a.m. (1445 GMT), the S&P/TSX composite index .GSPTSE was down 102.47 points, or 0.95 percent, at 10,691.20. Eight of its 10 main groups were lower.

Gold miners were a bright spot as the price of the precious metal firmed. [ID:nLB700009] Barrick Gold (ABX.TO) edged up 0.3 percent to C$37.36, while Yamana Gold rose 0.8 percent to C$9.83.

Adding caution to dealings was the start of the U.S. Federal Reserve’s two-day policy meeting on Tuesday. The U.S. central bank is expected end the meeting with a statement that there are signs the U.S. recession is waning but that recovery will be slow. [ID:nN10470294]

The Fed’s policy-setting committee is expected to hold its benchmark overnight interest rate in a range of zero to 0.25 percent.

$1=$1.10 Canadian Reporting by Ka Yan Ng; editing by Peter Galloway

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