12/09/2014 08:45 EST | Updated 02/08/2015 05:59 EST

TSX opens lower on oil price, interest rate uncertainty

The Toronto stock market racked up further losses Tuesday as traders try to gauge just how far oil prices have to fall before hitting bottom and consider whether U.S. interest rates will head higher sooner than expected.

The S&P/TSX composite index gave back 58.48 points to 14,085.69 following a 330-point plunge on Monday. The Canadian dollar was up 0.28 of a cent to 87.37 cents US.

U.S. indexes were sharply lower as the Dow Jones industrials fell 161.25 points to 17,691.23, the Nasdaq gave back 57.66 points to 4,683.03 and the S&P 500 index lost 20.41 points to 2,039.9.

Fed concerns were back on the front burner ahead of the central bank's meeting on interest rates next week. The Wall Street Journal said Fed officials will likely affirm a plan to start raising short-term interest rates in 2015 and are debating eliminating a key phrase — that rates will stay low for "a considerable time."

Oil prices slipped 19 cents to $62.86 US a barrel after tumbling almost $3 Monday in the wake of weak trade data  from China that further depressed demand prospects and a report from Morgan Stanley that suggested prices for Brent crude, an international benchmark, could fall to as low as US$43 a barrel next year. The TSX energy sector was up a slight 0.1 per cent.

The sector is now under water about 20 per cent year to date. It was up about 20 per cent mid-summer at a time when oil averaged around $105 US a barrel. But that was when prices were elevated by a more optimistic take on the global economy and geopolitical worries. But prices have slid since then as those concerns faded, the economic mood darkened and markets are now trying to work out a huge imbalance in supply and demand, made even more troublesome by the decision by the OPEC oil cartel to leave production levels unchanged.

Dividend, budget cuts

Canadian energy companies continue to be impacted by plunging oil prices. Baytex Energy is cutting its monthly dividend by more than half to 10 cents a month. It also cut its 2015 spending plans by 30 per cent from original tentative plans. Baytex is also cutting production but its shares gained 35 cents to $16.81.

Baytex follows Precision Drilling Corp., Vermilion Energy Inc. and Trilogy Energy Corp. in announcing reduced capital budgets for next year, as a result of the major drop in oil prices. Trilogy also suspended its dividend payment.

Talisman Energy Inc. said several parties including Spanish energy company Repsol have approached the oil and gas producer about potential deals. Talisman and Repsol held inconclusive talks during the summer but the Calgary company's shares have plunged about 60 per cent since then, making it a more attractive takeover target. Its shares rose eight per cent to $4.67.

The gold sector provided some lift to the TSX, up 2.8 per cent while February gold gained $24.50 to $1,219.40 US an ounce.

The base metals sector declined one per cent while March copper was unchanged at US$2.89 a pound.

Elsewhere, Hudson's Bay Co. had a quarterly net loss of $13-million or seven cents a share and "normalized" earnings of $116 million, both improvements from the same time last year. Retail sales nearly doubled to $1.91 billion from $984 million a year earlier and its shares fell 83 cents to $22.66.

AGF Management Ltd. was a major decliner, down 17 per cent to $8.06 after the company said that it plans to cut its quarterly dividend by 70 per cent to eight cents a share as of the first quarter of 2015.