The S&P/TSX composite index gave up solid gains in the morning to end the session down 4.66 points at 13,243.4, brining to an end six straight advances for the Toronto market as losses in the resource sectors accelerated in the late afternoon.
However, the TSX did find major support from Canadian National Railways (TSX:CNR) and Canadian Pacific (TSX:CP). Both blew past expectations and hit fresh 52-week highs with CN rising 4.4 per cent and CP surging more than 10 per cent.
The Canadian dollar tumbled after the Bank of Canada announced economic growth would be lower than expected through 2015. The currency tumbled 0.89 of a cent to 96.3 cents US.
U.S. indexes were lower after a string of gains as traders took in positive earnings from Boeing and a disappointment from Caterpillar.
The Dow Jones industrials lost 54.33 points to 15,413.33, the Nasdaq declined 22.49 points to 3,907.07 and the S&P 500 index was down 8.29 points at 1,746.38.
The industrials sector led TSX advancers after Canada's two largest railways both reported strong earnings results that beat analyst estimates on several key measures.
Canadian National Railway (TSX:CNR) said after the close Tuesday that quarterly profits climbed 6.1 per cent to $705 million. CN also posted adjusted earnings of $1.72 a share, a dime better than estimates. Revenue came in at $2.7 billion, against estimates of $2.64 billion and its shares ran up $4.84 to $114.59 after hitting a new 52-week high of $116.20.
On Wednesday, Canadian Pacific Railway (TSX:CP) posted record earnings and the lowest operating ratio in its history in the third quarter as revenue rose by six per cent from last year to $1.5 billion. CP's net income was $324 million or $1.84 per diluted share, up from $224 million or $1.30 per share in the third quarter of 2012. CP's operating ratio improved to 65.9 per cent, down from 74.1 per cent. Its shares jumped $13.79, or 10.23 per cent, to $148.53 after earlier hitting a new 52-week high of $150.42.
The strong stock performance surprised some analysts who thought the valuations were getting a bit rich.
"It really isn’t justified," said John Stephenson, portfolio manager at First Asset Funds Inc. "They have been a great trade for some time but it’s hard to see valuations moving much beyond where they are right now."
Commodity prices were sharply lower amid speculation that the People's Bank of China may tighten monetary policy to cool a hot property market. China reported Tuesday that house prices surged in some cities, including Guangzhou/Shenzhen where they soared 20 per cent year-over-year. Those in Shanghai jumped 17 per cent while Beijing saw a 16 per cent increase.
"There is no question there is worry there, bad debts, too much lending to the real estate sector," Stephenson said.
The bank reported Wednesday that outstanding real estate loans are up 19 per cent from a year ago.
The market was dragged down by a 2.7 per cent drop in the base metals sector as December copper lost seven cents to US$3.27 a pound. Teck Resources (TSX:TCK.B) fell 31 cents to C$29.41 while HudBay Minerals (TSX:HBM) fell 31 cents to $8.57.
The gold sector was down about 2.33 per cent as bullion fell $8.60 to US$1,334 an ounce. Goldcorp (TSX:G) faded 42 cents to C$26.57 and Barrick Gold Corp. (TSX:ABX) lost 35 cents to $20.12.
The energy sector was down about one per cent as the December crude contract on the New York Mercantile Exchange dropped $1.44 to US$96.86 a barrel, its lowest level since late June. Suncor Energy (TSX:SU) fell 87 cents to C$36.64.
Oil declines piled up amid data showing a much larger than expected buildup of supplies last week.
Beyond the strong performance in the industrials sector, telecom stocks were also supportive, up 0.72 per cent as Telus (TSX:T) climbed 72 cents to C$36.47.
It was a mixed bag in the U.S. where Caterpillar shares were down $5.41, or 6.07 per cent, to US$83.76 after the maker of heavy equipment cut its 2013 revenue forecast to US$55 billion from earlier estimates of $56 billion to $58 billion.
Caterpillar earned $946 million, or $1.45 a share, in the third quarter, down from $1.7 billion, or $2.54 a share, a year ago. Total sales and revenue fell to $13.42 billion from $16.45 billion. Analysts expected earnings of $1.68 a share on revenue of $14.29 billion.
Aircraft maker Boeing reported third-quarter profit rose 12 per cent to $1.2 billion, or $1.51 a share. Ex-items, earnings per share came in at $1.80, up from $1.55 a year earlier. Revenue rose to $22.1 billion, from $20 billion a year earlier. Analysts had expected earnings of $1.55 a share on revenue of $21.7 billion. Boeing also raised its full-year 2013 earnings expectations and its shares rose $6.54, or 5.34 per cent, to $129.02.