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Flat financials take wind out of TSX

The Canadian Press

Toronto — The Toronto stock market turned in a weak performance Friday as investors backed out of financial stocks after Royal Bank of Canada turned in a quarterly loss.

U.S. markets closed slightly higher as investors tried to reconcile mixed economic signals.

Toronto's S&P/TSX composite index closed down 22.3 points to 10,370.07.

Still, the market had a winning week, up 3.7 per cent, as the spring rally that started March 10 showed no signs of slowing down.

The main index is up a stunning 37 per cent since the lows of March 9 as investors hope that an economic recovery will take place by the end of the year.

But analysts warn this surge has perhaps gone too far and happened too fast.

“We're sort of at a very pivotal point here,” said Danielle Park, at Venable Park Investment Counsel in Barrie, Ont.

“Fundamentally, there's a disconnect between what the market is doing and what the data has been doing and I think we're going to get some pullback, probably between now and the fall.”

The Canadian dollar was sent surging again Friday, driven up by the recent run on the stock markets combined with rising oil prices and a weaker U.S. dollar.

The loonie close up 1.9 cents (U.S.) to 91.6 cents after running up as high as 91.76 cents – adding up to a gain of almost 8 cents U.S. during May.

The Toronto financial sector was flat after Royal Bank, the last of the big Canadian banks to report, reported a $50-million (Canadian) second-quarter loss, down from a $928-million profit a year ago.

The TSX Venture Exchange climbed 18.92 points to 1,124.08.

New York's Dow Jones industrial average was up 96.53 points to 8,500.33 as the U.S. Commerce Department said first-quarter gross domestic product fell by 5.7 per cent. Last month, it estimated GDP declined by 6.1 per cent.

The report “points to recovery,” said Peter Cardillo, chief market economist at the brokerage house Avalon Partners Inc.

“And what you have here is a market that continues to look for recovery.”

But the index from Chicago-area purchasing executives showed a larger drop in activity in May than in April. Analysts had anticipated a slightly smaller contraction. The report is viewed as a precursor to the more closely watched national manufacturing index from the Institute for Supply Management, due Monday.

The Nasdaq composite index moved up 22.54 points to 1,774.33 while the S&P 500 index rose 12.31 points to 919.14.

The TSX energy sector moved down 0.45 per cent even as the July crude contract in New York rose $1.23 (U.S.) to $66.31 a barrel, a fresh six-month high, on hopes demand will increase. That price is about double the lows reached in March, when crude tumbled below $35 a barrel.

The base metals sector was ahead 1.75 per cent, and the gold sector rose 0.5 per cent as the August bullion contract rose $17.10 to $980.30 an ounce.

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