03/29/2012 08:31 EDT | Updated 05/29/2012 05:12 EDT

TSX closes lower, traders worry gains not justified by economic performance

TORONTO - The Toronto stock market was negative for a third session Thursday as resource stocks and commodities continued to weaken on worries about the tepid pace of the global economic recovery.

The resource-heavy S&P/TSX composite index closed well off early lows, coming back from a 219-point tumble to close down just 74.49 points at 12,339.36, while the TSX Venture Exchange was down 0.49 of a point at 1,549.76.

Shares in Research in Motion Ltd. (TSX:RIM) fell in extended trading after its latest financial report fell short of already low expectations.

RIM reported a fourth-quarter loss of US$125 million or 24 cents per share as it took a $355-million charge to goodwill. The loss compared with a profit of $934 million or $1.78 per diluted share a year ago. Revenue fell to $4.2 billion, down from $5.6 billion. Analysts had been expecting a reduced profit in the quarter.

RIM shares had added three cents to C$13.69 in Toronto ahead of the release but fell in after-hours activity. The stock dropped 30 cents to US$13.43 just after 6 p.m. ET, a decline of about two per cent from the Nasdaq close.

The Canadian dollar shook off early losses to move up 0.12 of a cent to 100.33 cents US ahead of the release of the new federal budget after the market close.

Finance Minister Jim Flaherty announced more than $5 billion in cuts to annual federal spending by 2014-15. He also said that 19,200 federal positions are to be eliminated, or 4.8 per cent of the federal workforce. The age of eligibility for old age security and the guaranteed income supplement to gradually move to 67 from 65, beginning in 2023.

U.S. markets came back from sharp losses to close little changed amid encouraging employment data, with the Dow industrials up 19.61 points to 13,145.82.

The Nasdaq fell 9.6 points to 3,095.36 and the S&P 500 index was down 2.26 points to 1,403.28.

The U.S. Labour Department reported that the number of Americans who sought jobless benefits last week fell by 5,000 to 359,000. Applications for jobless insurance are at a four-year low.

Also, the U.S. government’s third and final look at fourth-quarter growth confirmed that the economy grew at an annual rate of three per cent in the October-December period, the fastest pace since the spring of 2010.

But economists believe that growth has slowed to around 1.5 per cent in the current first quarter of 2012.

North American stock markets had also fallen for the past two days as a flurry of economic data raised concerns about the pace of the American economic revival.

U.S. economic indicators have mostly surpassed expectations this year. However, markets have stalled this week on weak readings in consumer confidence and the Federal Reserve Bank of Richmond's measure of regional manufacturing.

And on Wednesday, traders were further dismayed with data showing that although durable goods orders increased by 2.2 per cent last month, that was still lower than the three per cent pace that was expected.

"I think the data points have been more negative than positive," said Garey Aitken, director of equity research at Bissett Investment Management.

"So I think we have a situation here where we’re getting back into that risk on, risk off mindset where people are just looking at the headlines. On balance, they haven’t been great, people are sitting on pretty good gains from the early part of 2012 and there are fading stock markets here."

Traders have also become more bearish on the Chinese economy, which has been a major pillar in supporting the recovery from the 2008 financial crisis and recession.

The growing Chinese economy has been of special benefit to the resource-heavy TSX because of its huge appetite for oil and metals. Higher commodity prices have supported resource stocks on the Toronto market.

But the Chinese economy has been slowing from double digit growth to gains of the seven per cent region as the government slows the economy in order to drive down high inflation.

"I think we have seen a gradual but nonetheless definitive shift down in Chinese growth and what that means in terms of that whole emerging market for commodities and resources has had a noticeable impact on the Canadian equity market given our cyclical orientation." added Aitken.

TSX losses were led by the energy sector, down almost one per cent as oil prices tumbled for a second day after data released Wednesday showed a much bigger than expected increase in U.S. crude inventories last week. Other factors driving oil later included comments by Saudi Arabia's oil minister that his country is capable of pumping more crude to counter high prices, and expectations that the U.S. and other countries could release emergency reserves to also counter high prices.

The May crude contract on the New York Mercantile Exchange declined $ 2.63 to US$102.78 a barrel. Canadian Natural Resources (TSX:CNQ) dropped 37 cents to $32.46 Talisman Energy (TSX:TLM) gave back 26 cents to $12.39.

The financials group also lost about one per cent while Manulife Financial (TSX:MFC) moved down 30 cents to $13.46 and Royal Bank (TSX:RY) was 80 cents lower to $57.98.

The base metals sector was largely responsible for the turnaround in the TSX during the afternoon, moving from negative territory to gain per cent as copper prices inched higher, closing up almost half a cent to US$3.80 after falling 10 cents over the last two sessions. China is the world's biggest consumer of the metal, which is viewed as an economic bellwether because it is used in so many applications. First Quantum Minerals (TSX:FM) gained 83 cents to $19.10 but Sherritt International (TSX:S) lost 13 cents to $5.47.

The gold sector also turned positive even as bullion prices moved lower after falling $27 on Wednesday, down another $5.70 to US$1,652.20 an ounce. Iamgold (IMG:G) gained five cents to $13.15.

In other corporate news, Rogers Communications Inc. (TSX:RCI.B) is laying off about 300 employees across its operations. Company spokeswoman Patricia Trott says the cuts are focused on management and head office positions. Its shares declined gained 10 cents to $39.21.

Birchcliff Energy Ltd. (TSX:BIR) shares tumbled 20.52 per cent to $7.01 after it announced it is taking itself off the sale block because no suitable offer emerged from its hunt for a buyer.