TORONTO - The Toronto stock market closed sharply lower Tuesday, but still hung on to most of the huge 452-point runup from the previous session.
New York indexes were also weak following a substantial advance Monday in response to the U.S. government's plan to help banks dispose of bad loans.
Toronto's S&P/TSX composite index was well off the lows of the session, recovering from an early deficit of about 200 points to close down 109.12 points to 8,849.39, with losses led by energy and financial stocks.
The TSX Venture Exchange inched 0.26 of a point higher to 924.29. The Canadian dollar slipped 0.62 cent to 81.18 cents US.
New York's Dow Jones industrial average fell 115.65 points to 7,660.21 after the previous session's rise of 497 points. The Nasdaq composite index was 37.27 points lower at 1,518.5 while the S&P 500 receded 16.58 points to 806.34.
The strong showing on the TSX Monday extended a two-week rally as the U.S. government detailed a plan to support private investors in taking over as much as US$1 trillion in bad loans from American banks.
"At least there is a plan in place: it may not be the perfect one to try to fix the financial system," said Ian Nakamoto, director of research at MacDougall, MacDougall and MacTier.
"The incentives are there. If you read the plan, I think there will be enough private money that will come in to try to buy these toxic assets."
The TSX is still up 17 per cent from the trough of March 9 -- but it still is underwater year-to-date and down dramatically from last June's peak of just over 15,000.
"The movement up is sort of minor -- I mean we're down like 50 per cent," Nakamoto noted. "In order to get back, we need to move up 100 per cent."
The Dow industrials were still up almost 17 per cent from March 9.
Investors were taking in appearances by Federal Reserve chairman Ben Bernanke and Treasury Secretary Timothy Geithner before a congressional hearing to testify over millions of dollars in bonuses at American International Group Inc.
Bernanke said he wanted to sue to stop AIG from paying bonuses, but was talked out of it. He also said a collapse of the insurance giant could have caused a "global financial and economic meltdown."
Geithner asked lawmakers to give him power to seize control of banks, take over their bad loans and sell the good ones to competitors.
Nick Kalivas, vice president of financial research at the brokerage MF Global in Chicago, said stocks could be stuck in neutral because of the enormity of this month's gains and as traders await quarterly results and forecasts from companies. For most companies the first quarter ends March 31st.
"There is not much more of a catalyst to go higher on," he said. Kalivas contends the coming corporate results could either bolster a sense that the U.S. economy is poised to recover or pelt investors with more grim predictions.
The TSX financial sector, which had surged 34 per cent from the March 9 trough, was off two per cent. TD Bank (TSX:TD) declined $1.77 to $43.73 and National Bank (TSX:NA) fell $2.21 to $42.97.
The energy sector gave back 2.7 per cent even as oil prices held steady well above US$50 a barrel.
Oil has risen more than 30 per cent this month as the U.S. dollar weakened and as traders wagered that the slide in the world's economy could be slowing. Oil had fallen in recent months as traders feared that economic weakness would crimp demand.
The May crude contract on the New York Mercantile Exchange was down for most of the day but ended up closing 18 cents higher to US$53.98 a barrel. Suncor Inc. (TSX:SU) declined $2.24 to $28.50 a day after its blockbuster merger deal with Petro-Canada (TSX:PCA), which gave back $1.69 to $34.01. EnCana Corp. (TSX:ECA) lost $1 to $54.50.
The April bullion contract on the Nymex faded $28.70 to US$923.80 an ounce, taking the Toronto gold sector down 1.25 per cent. Goldcorp Inc. (TSX:G) moved 45 cents lower to $41.37.
The base-metals sector pulled back almost two per cent with First Quantum Minerals (TSX:FM) down $5.72 to $36.50 after a big share issue. The rest of the sector was mainly higher as Teck Cominco Ltd. (TSX:TCK.B) gained 14 cents to $6.78.
HudBay Minerals Inc. (TSX:HBM) ran up 20 cents to $6 after dissident investors won control of the mining company following a bitter proxy battle.
Shaw Communications Inc. (TSX:SJR.B) slipped 10 cents to $19.99 as it reported subscriber growth in all its services, including an 11 per cent rise in digital TV clients.
