Banks, commodity stocks lead TSX lower even as Scotiabank reports solid earnings

Traders work on the floor of the New York Stock Exchange, Tuesday, March 9, 2010.(THE ASSOCIATED PRESS/Mark Lennihan)

TORONTO - Commodity and financial stocks pushed the Toronto stock market lower Tuesday as oil and gold prices fell and Scotiabank failed to encourage buyers even as its latest earnings beat expectations.

The S&P/TSX composite index dropped 45.13 points to 11,918.71. The Canadian dollar rose 0.12 of a cent to 97.43 cents US, approaching the highest level of the year.

Scotiabank (TSX:BNS) turned in a first-quarter profit of $988-million, up 17 per cent from a year earlier. Scotiabank said that was the equivalent of 91 cents a diluted share or 93 cents on a cash basis, five cents a share better than analysts had forecast. Revenue came in at $3.9 billion, also above expectations.

Provisions for credit losses were $371 million, down from $420 million in the prior quarter. Scotiabank shares were down 68 cents at $49.42, but that was after having risen over the past week as earnings reports from other banks lifted financials.

Scotiabank was the last of the big banks to report quarterly earnings. All save Royal Bank (TSX:RY) handed in earnings that beat analyst expectations. Royal shares fell 64 cents to $57.96 while National Bank (TSX:NA) dipped 65 cents to $61.35.

Canada's five biggest banks all saw their profits soar in the first quarter compared with the previous year when the recession battered earnings. Combined, they raked in $5.09 billion in profits in the quarter.

"For the first quarter, one of the standouts was the retail and commercial banking," said John Kinsey, portfolio manager at Caldwell Securities.

"That is sort of the nuts and bolts of their business (and) for most of them, the loan loss provisions were down. So those two things, put together, make a good case for recovery in the Canadian economy."

Crude prices fell back after rising about 15 per cent over the last month on hopes for rising demand. The April oil contract on the New York Mercantile Exchange was down 38 cents at US$81.49 a barrel and the energy sector pulled back 0.63 per cent. Suncor Energy (TSX:SU) declined 64 cents to C$31.39 while Canadian Oil Sands Trust (TSX:COS.UN) slid 56 cents to C$27.59.

The gold sector was negative as a stronger U.S. dollar helped send the April gold contract on the Nymex $1.70 lower to US$1,122.30 an ounce. Kinross Gold Corp. (TSX:K) faded 32 cents to C$19.04.

The base metals sector eased 0.83 per cent as May copper was unchanged at US$3.41 a pound. Copper prices have surged about 100 per cent in the past year. Teck Resources (TSX:TCK.B) was down 53 cents at C$41.04.

The tech and telecom sectors were supportive with CGI Group (TSX:GIB.A) ahead 25 cents at $15.28 while BCE Inc. (TSX:BCE) climbed 55 cents to $31.03.

The negative showing on the TSX came 12 months after the market hit bottom in the depths of the financial crisis, which was sparked by the collapse of the U.S. housing sector. Stocks have surged since hitting multi-year lows on March 9 of last year, with the turnaround starting a day later when U.S. bank Citigroup said it was turning a profit.

Since then, evidence of so-called "green shoots" and signs of a tentative recovery have sent indexes surging. The S&P/TSX composite is up 58 per cent from a year ago, while the Dow Jones industrial average is ahead 61.2 per cent.

But the markets have found it harder to gain traction since the beginning of this year as investor expectations have grown and stocks are now seen as more fairly valued. That means it will take more than just an occasional upbeat economic report or earnings release to send stocks higher.

"Things turned out an awful lot better than we had thought," added Kinsey.

"Most of the good news is out. I think what we're hoping for this year is that we will have modest, but kind of steady growth."

The TSX Venture Exchange moved down 3.17 points to 1,558.76.

Financials help take New York markets slightly higher. The Dow Jones industrials gained 11.86 points to 10,564.38, the Nasdaq composite index rose 8.47 points to 2,340.68 while the S&P 500 index was up 1.95 points to 1,140.85.

In other corporate news, shares in Cisco Systems Inc. were unchanged at US$26.13. The computer networking gear company said that it was upgrading one of its biggest pieces of networking hardware, a router that's used to power the most trafficked parts of the Internet backbone. Its new model is three times faster.

Bombardier Inc. (TSX:BBD.B) cancelled a plan to buy back up to US$550 million of its outstanding debt securities and issue new notes. The transportation giant said "current market conditions are such that the offering is unattractive and unsatisfactory to Bombardier at this time." Its shares were down 22 cents at $5.87.

Shares in Alimentation Couche-Tard Inc. (TSX:ATD.B), Canada's largest convenience store operator, lost $1.18 to $18.86 as it reported its third-quarter profits fell to US$54.8 million from $71.1 million as the company was hurt by lower fuel revenues in the United States.

Major Drilling Group International Inc. (TSX:MDI) shares were down $1.04 to $26.88 as the company narrowed its fiscal 2010 third-quarter loss to $4.5 million or 19 cents a share from $5.1 million or 21 cents in the comparable 2009 period. Revenue for the three months ended Jan. 31 was $72.5 million, down from $87.4 million the previous year.