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Toronto totters as Dow plummets

January 23, 2014

Dorel , Saputo in focus Signs of pressure on China's manufacturing sector weighed heavy on North American stock markets Thursday, with the well-known Dow Jones index taking a triple-digit dive. The Toronto stock market finished Thursday in negative territory, as Wall Street weakened on disappointing earnings and a weak outlook for the Chinese economy. The S&P/TSX composite index erased 55.23 to close at 13,932.97. The Canadian dollar eased back 0.09 cents to 90.11 cents U.S., after dipping below the 90-cent mark briefly Thursday for the first time since mid-2009. Dorel Industries Inc. is closing an assembly and testing facility in Pennsylvania and moving a research and development unit in Connecticut in a cost-reduction effort at its recreational and leisure business, which makes bicycles. Dorel says about 100 employees will be affected globally. The company's shares were down six cents to $41.15 . Shares in Canadian cheesemaker Saputo Inc. rose seven cents to $52.76 as it emerged victorious in a bidding war for Warrnambool Cheese and Butter. The Murray Goulburn Co-Operative will sell its shares to Saputo, and expects to receive at least AU$92.8 million cash in return. Gold stocks proved among the few highlights on the Toronto market. OceanaGold raced ahead 17 cents , or 8.7%, to $2.12 , while Barrick Gold added 65 cents , or 3.1%, to $21.46 . The base metals group took the biggest bruising, what with Nevsun Resources falling 15 cents , or 3.4%, to $4.25 , and Major Drilling Group capsizing 28 cents , or 3.3%, to $8.03 . Next hardest hit were financials, among them, Royal Bank , off $1.63 , or 2.2%, to $71.55 , while Manulife Financial stumbled 39 cents , or 1.8%, to $21.82 . The global economy started 2014 on a disjointed note, with the euro zone's private sector in better shape than expected and China's vast manufacturing industry contracting for the first time in six months. Domestically, Statistics Canada reported that retail sales came in for November at $41 billion , or 0.6% higher than the month before, in contrast to a market call for a gain of 0.2%. StatsCan chalks the hike up to higher sales at motor vehicle and parts dealers as well as electronics and appliance stores. The agency also noted that there were 512,300 people receiving regular Employment Insurance benefits in November, virtually unchanged from October. ON BAYSTREET The TSX Venture Exchange turned higher 2.84 points to 983.28 All but two of the 14 Toronto subgroups went south on the day, weighed mostly by metals and mining, down 1.4%, while global base metals descended 1.1% and financials lost 0.9%. The two gainers were gold, up 3.4%, and materials, up 1.1%. ON WALLSTREET Stocks slid Thursday as investors worried about corporate earnings. The Dow Jones Industrial Average plummeted 175.99 points, or 1.1%, to finish a rough session at 16,197.35, the third straight day of declines. The S&P 500 index faded 16.40 points to 1,828.46. The NASDAQ drifted lower by 24.13 points to 4,218.87 Shares of Nokia tanked after the cell phone and networking equipment maker reported a bigger than expected loss and drop in sales. Microsoft, which is in the process of buying the device business of Nokia, will report its earnings after the bell. In addition to results investors will be looking for information on Microsoft's CEO succession plans. Shares of IBM were up slightly after it announced a deal early Thursday to sell part of its server business to Chinese computer maker Lenovo for $2.3 billion U.S. IBM fell on Wednesday as well following a weak earnings report. Facebook shares dropped Thursday after a report Wednesday calling the social media giant's longevity into question by comparing it to MySpace . Facebook had been on a tear, but investors have pulled back in recent days as they gear up for the company's earnings next week. Shares of Herbalife plunged after Senator Ed Markey , a Democrat from Massachusetts , called for an investigation into the company's business practices. The vitamin and nutritional supplements distributor has been caught in the middle of a battle between hedge fund titans, including Pershing Square's Bill Ackman , who has called it a pyramid scheme, and Carl Icahn , who has a big stake in the company. Netflix jumped over 16% after the company reported its biggest quarterly gain in subscribers in three years. Shares of eBay were up flat after initially jumping when the online auction site said Wednesday that Icahn took a small stake in the company and submitted a proposal to spin out PayPal into a separate business. eBay said it had no plans to follow through on Icahn's plan. CEO John Donahue called it a "distraction" on the company's earnings conference call. Apple shares turned higher after Icahn took to Twitter to disclose that he had increased his take in the company by $500 million U.S. If that sounds familiar, it's because he did the exact same thing yesterday. The activist investor has been publicly campaigning for Apple to return more cash to shareholders in the form of a $150-billion U.S. buyback. On Thursday, he put out a seven-page letter to Apple making his case. Prices for 10-year U.S. Treasuries hiked, substantially lowering yields to 2.77% from Wednesday's 2.86%. Treasury prices and yields move in opposite directions. Oil prices leaped 58 cents to $97.30 U.S. a barrel. Gold prices bolstered $21.50 to $1,260.10 U.S. an ounce.

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Source: Baystreet Stock Market Update (Canada)

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