12/31/2014 11:55 EST | Updated 03/02/2015 05:59 EST

TSX set for 7% gain in 2014, Dow up 8.7%

The Toronto stock market is set to wrap up the year with a seven per cent gain, lagging the Dow Jones industrial index, which is up 8.7 per cent in 2014.

These gains follow on a stellar 2013, when the TSX rose nine per cent and the Dow was up 26 per cent.

The TSX index is closing the year on a down note in light trading, falling five points to 14,634 on Wednesday at midday.

Oil and metal prices were in decline after the HSBC's monthly purchasing managers' index showed a decline in orders for Chinese manufacturers. The index fell below the 50-point threshold to 49.6, meaning that orders were contracting.

The Canadian dollar is trading at 86.24 US, down eight cents on the year.

Declining demand for raw materials from China has hurt Canadian exports this year and helped knock commodity prices lower.

Oil continued its slide today, hitting energy stocks already beaten down by months of uncertainty over oil prices.

The West Texas Intermediate contract was trading in New York at $53.00 US a barrel, down $1.12 and a decline of 47 per cent on the year. Brent Crude was down $1.06 at $56.82 a barrel, a fresh 5½-year low.

Brent's retreat is the biggest since 2008, when prices fell 51 per cent in response to a demand slump after the financial crisis.

At its highest point this year – on Sept. 3, 2014 – the TSX index closed at 15685.13, a gain of 15 per cent.

But the fall in oil prices since September has dragged down Toronto stocks. The oversupply in global oil reserves as U.S. shale producers stepped up production became clear to traders this fall and the oil price sank from the $90 range in September to the $70 range six weeks later.

Then on Nov. 27, OPEC met in Vienna and decided not to reduce production in the face of falling prices. Traders are still searching for a bottom as oil heads for $50 range.

The U.S. economy is less susceptible to oil price shock as the country is a net oil importer. Falling oil prices have helped speed up the recovery of the manufacturing sector, cut costs for the transportation sector and empowered consumers to spend more.

The improved economy has helped U.S. stocks to a solid gain. The Dow is up 8.7 per cent on the year, the broader-based S&P 500 index was up 12.7 per cent and the Nasdaq is up 14.8 per cent.

On Wednesday, the Dow was up 40 points to 18023, the S&P up three points to 2083 and the Nasdaq rose 19 points to 4796.

The Dow and S&P 500 index hit their highs for the year within the past week and are trading near record levels.