TSX slides: U.S. service sector growth disappoints, ECB chief offers no new help

TORONTO – The Toronto stock market tumbled Thursday as a worse than expected reading on the American non-manufacturing sector and worries about Europe trumped a slew of strong earnings reports.

The S&P/TSX composite index fell 215.15 points at 12,014.97, with the markets also weighed down by Research In Motion (TSX:RIM) as the BlackBerry maker’s stock closed below $12 for the first time since late 2003.

RIM shares fell 72 cents or 5.7 per cent to $11.91. The company stock also lost about five per cent in each of the previous two sessions despite having rolled out its new BlackBerry 10 operating system.

The TSX Venture Exchange lost 14.6 points to 1,416.61.

The Canadian dollar was off 0.25 of a cent at 101.12 cents US.

U.S. markets also turned lower after the Institute for Supply Management said its index of non-manufacturing activity dropped to 53.5 last month from 56 in March. Any reading above 50 indicates expansion but the reading was a disappointment to traders who had expected a reading of 55.4.

The ISM’s survey covers all sectors outside of manufacturing, totalling about 90 per cent of the American economy. The survey includes retail, construction, financial services, health care and hotels.

“So the backdrop is, hey, the U.S. is slowing and when you have the non-manufacturing index (slowing), and that’s 90 per cent of the economy, that’s a worry,” said John Stephenson, portfolio manager at First Asset Funds Inc.

The latest ISM data added to uncertainty about the strength of the U.S. economy. Earlier this week, the ISM’s index on the manufacturing sector exceeded expectations.

“You have all of these cross-currents, good corporate earnings as opposed to fairly pessimistic to bleak economic outlooks,” Stephenson said.

The Dow Jones industrial index lost 61.98 points to 13,206.59.

The Nasdaq composite index moved 35.55 points lower to 3,024.3, while the S&P 500 index slipped 10.74 points to 1,391.57.

There was good news a day before the release of the U.S. non-farm payrolls report. The U.S. Labour Department announced that jobless insurance claims for last week came in at 365,000, down 27,000 from the previous week.

Economists expect the U.S. economy cranked out about 160,000 jobs in April.

But the positive jobless news was also overshadowed by worries about deteriorating economic conditions in Europe and pessimism over what the European Central Bank can do to spur growth.

ECB president Mario Draghi offered little prospect that the bank would deliver more support for the struggling economies of the 17-country eurozone.

Instead, he is urging governments to agree to a growth strategy that would work alongside tough spending cuts.

Budget cuts and tax hikes, which have been introduced by eurozone governments to reduce debt, are now seen as hurting growth and some European governments are calling for policies to focus more on stimulating economic activity.

The gold sector was the leading decliner, down about 3.65 per cent as bullion prices lost ground with the June contract in New York down $19.20 to US$1,634.80 an ounce. Barrick Gold Corp. (TSX:ABX) was off $1.28 at C$37.52 while Goldcorp Inc. (TSX:G) faded $1.59 to US$35.95.

Other commodity prices were soft with the July copper contract slipping five cents to US$3.74 a pound, taking the base metals sector down 2.28 per cent. HudBay Minerals (TSX:HBM) fell 22 cents to C$10.15 while Teck Resources (TSX:TCK.B) fell $1.05 to $35.34.

The energy sector was off 2.26 per cent as the June crude contract on the New York Mercantile Exchange down $2.68 to US$102.54 a barrel. Suncor Energy (TSX:SU) gave back 92 cents to C$31.32 while Cenovus Energy (TSX:CVE) shed 66 cents to $33.95.

Insurers led the way to a 1.17 per cent drop in the financials sector.

Manulife Financial Corp. (TSX:MFC) had a $1.2-billion profit in the first quarter, a 22 per cent jump from a year ago. It attributed the improvement to a number of special items as well as strong operational performance in Canada and Asia. The profit amounted to 66 cents per share before dilution, up from 54 cents per share or $985 million in the first quarter of 2011 and much higher than the 36 cents a share that analysts expected. Its shares slipped 36 cents to $12.98.

Great-West Lifeco Inc. (TSX:GWO) reported net income available to common shareholders was $451 million or 47.5 cents per share in the first three months of 2012. That was up from $415 million or 43.8 cents per share in the year-earlier quarter. Revenue was $6.5 billion, up from $6.25 billion a year earlier but its shares were down 50 cents to $24.32.

Shares in media giant BCE Inc. (TSX:BCE) added a penny to C$40.31 as the company reported $574 million in profit in the first quarter before adjustments, a 14.1 per cent increase from the same time last year. Adjusted profit was $580 million, or 75 cents per common share, which was three cents a share ahead of analyst estimates.

Elsewhere on the earnings front, General Motors reported earnings per share of 93 cents excluding one-time items related to the impairment of goodwill primarily in Europe, beating analyst estimates by eight cents a share. Net income fell to US$1 billion, or 60 cents a share, from $3.15 billion, or $1.77 a share, a year ago while revenue was $37.8 billion, up 4.4 per cent from a year ago. GM shares gave up early gains and were down 55 cents at US$22.38.