The S&P/TSX composite index slipped 0.11 of a point to 12,009.79, after the latest regional survey by the Fed said the pace of economic growth is expanding. It also pointed to rising retail sales and loan demand, while housing markets are showing signs of improvement across most areas.
On the negative side, the Fed's so-called Beige Book noted that the worst drought in decades is impacting farm output in the Midwest and there was some general softening in the manufacturing area because of weak growth in Europe and Asia.
"Add it all up, and the Fed districts were not particularly cheery about what they were hearing on the ground as they compiled this report, with the tone still consistent with the Fed delivering additional stimulus before year end," said CIBC World Markets chief economist Avery Shenfeld.
The TSX Venture Exchange was off 12.72 points to 1,229.16.
The Canadian dollar was down 0.18 of a cent at 101.06 cents US amid lower prices for oil and metals.
New York indexes were listless while traders also took in data showing greater than expected U.S. economic growth and a steadily improving American housing sector.
The Dow Jones industrial average was 4.49 points higher at 13,107.48.
The Nasdaq composite index was ahead 4.05 points at 3,081.19, and the S&P 500 index rose 1.19 points at 1,410.49.
Other data showed that the second estimate of second-quarter gross domestic product suggested the U.S. economy grew at an annualized rate of 1.7 per cent, up from the original reading of 1.5 per cent.
Another report said Americans signed the most contracts to buy homes in July than at any other point in the last two years. The National Association of Realtors’ index of sales agreements for previously occupied homes jumped 2.4 per cent in July to 101.7.
Traders have high hopes pinned on a speech Friday morning by central bank chairman Ben Bernanke.
Expectations for another round of economic stimulus have risen over the past couple of weeks after the minutes from the Fed's last interest rate meeting Aug. 1 showed more members wanting to see the central bank take more action to revive the economy.
And then, last Friday, the Wall Street Journal reported that Bernanke had written a Republican lawmaker to say there is more the Fed could do to help the economy.
Still, there are doubts Bernanke would commit to more stimulus ahead of important data next week, including the latest snapshot of the manufacturing sector and the August non-farm payrolls report at the end of the week. Also, traders hope the European Central Bank will unveil measures on Sept. 6 to lower borrowing costs for the most troubled eurozone countries, such as Spain. The Fed holds its next interest rate announcement Sept. 13.
"I think what the ECB does or doesn’t do is much more important because Europe is much more pivotal right now," said John Johnston, chief strategist at Davis Rea Ltd.
"But the Fed’s basically going to do more — it’s just a matter of time."
The base metals sector eased one per cent as copper prices declined for a fourth session with September copper dropping two cents to US$3.44 a pound. Capstone Mining (TSX:CS) shed eight cents to C$2.42 and First Quantum Minerals (TSX:FM) was down 43 cents to $18.49.
Oil price declines accelerated amid data showing a big increase in U.S. crude supplies last week. The Energy Information Administration reported an increase of 3.8 million barrels in crude stockpiles versus an expected decrease of two million barrels. The EIA also reported gasoline inventories down 1.5 million in the week, less than the two million barrels that had been forecast.
The October crude contract on the New York Mercantile Exchange was down 84 cents to US$95.49 a barrel.
The energy sector pulled back 0.7 per cent and Cenovus Energy (TSX:CVE) shed 37 cents to C$32.24 and Suncor Energy (TSX:SU) fell 36 cents to C$31.10.
The gold sector was off about one per cent as bullion fell $6.70 to US$1,663 an ounce. Barrick Gold Corp. (TSX:ABX) lost 59 cents to C$36.72.
The telecom sector led advancers as Telus Corp. (TSX:T) climbed 86 cents to $64.70.
The financial sector was also positive a day after Bank of Montreal (TSX:BMO) and Scotiabank (TSX:BNS) delivered quarterly earnings reports which beat expectations. Royal Bank (TSX:RY), CIBC (TSX:CM), TD Bank (TSX:TD), National Bank (TSX:NA) post earnings results Thursday. Royal Bank was ahead 43 cents to $54.60 and National Bank gained $1.28 to $75.93.
After markets closed, Scotiabank says it has reached an agreement to buy ING Bank of Canada from Netherlands-based parent ING Group for $3.13 billion in cash. The deal is expected to result in a net investment by Scotiabank of $1.9 billion, after deducting the excess capital currently at ING Direct.