TORONTO -- The Toronto stock market closed lower Monday as investors locked in some profits from last week's solid gains and turned their focus from political haggling over the U.S. debt situation to corporate earnings.
The S&P/TSX composite index fell 41.26 points to 12,499.55, giving back a chunk of last week's advance of almost two per cent. The TSX Venture Exchange slipped 4.33 points to 1,223.89.
The Canadian dollar maintained lift from Friday's much stronger than expected December employment report, up 0.14 of a cent to 101.45 cents US.
U.S. indexes also backed off with the Dow Jones industrials 50.92 points lower at 13,384.29 after charging ahead almost four per cent last week. The Nasdaq dropped 2.85 points to 3,098.81 while the S&P 500 index was off 4.58 points to 1,461.89.
Equity markets ran ahead last week after U.S. lawmakers passed a bill to avoid a combination of government spending cuts and tax increases that have come to be known as the "fiscal cliff."
Traders were also focused on the start of the fourth-quarter earnings season in the U.S., which will be kicked off by resource giant Alcoa Inc. after the close Tuesday. Its shares were off 16 cents at US$9.10.
The company has been under pressure as a result of a global manufacturing slowdown, in particular by falling demand from China last year.
"The expectation is for profit, a small one at that," said Craig Fehr, Canadian markets specialist at Edward Jones in St. Louis.
"But the bigger implication for the markets will be looking a things like what they say about aluminum demand, which has implications for Chinese growth, for external demand around the world. The better the international environment looks from an emerging markets point of view, the much better the outlook for the Canadian market and economy."
The gold sector was the leading TSX decliner, down about 1.5 per cent as February bullion closed lower for a third session, down $2.60 to US$1,646.30 an ounce. Goldcorp Inc. (TSX:G) faded 62 cents to C$34.69.
Barrick Gold Corp. (TSX:ABX) declined 57 cents to $33.57 after the Supreme Court of Pakistan cancelled a lease agreement for a copper-and-gold project being developed by a joint venture between Barrick and a Chilean company. It ruled that the joint venture agreement regarding the project was illegal as it broke Pakistan's mine development laws.
Gold prices have suffered in recent days because of uncertainty about whether the U.S. Federal Reserve might end its stimulus program of bond buying in the second half of 2013. Minutes from the Fed's latest policy meeting showed a split over how long to continue the purchases amid concerns that they could destabilize the economy.
The bond buying, known as quantitative easing, has supported bullion prices because of worries the program would drive inflation higher. Gold is seen as a hedge against inflation.
The energy sector was down 0.65 per cent even as the February crude contract on the New York Mercantile Exchange switched direction to head up a dime to US$93.19 a barrel. Suncor Energy (TSX:SU) shed 35 cents to C$33.23 and Talisman Energy (TSX:TLM) was 27 cents lower at $11.62.
Losses on the TSX were well off session lows, in large part because early losses in the mining sector narrowed even as March copper dipped two cents to US$3.68 a pound. The base metals sector drifted 0.14 per cent higher and HudBay Minerals (TSX:HBM) climbed 35 cents to C$11.19 while Thompson Creek Metals (TSX:TCM) gained 16 cents to $4.43.
The TSX financial sector also closed off the worst levels of the day, down a slight 0.04 per cent even as global regulators eased new rules obliging lenders to set capital aside. The so-called Basel III rules are a set of new international standards to make sure banks don't fall back into the sort of trouble that caused the 2008 financial crash. On Sunday, the officials setting those rules delayed the date by which certain amounts of cash had to be readily available.
On the TSX, Royal Bank (TSX:RY) moved down 26 cents to $60.81 while Sun Life Financial (TSX:SLF) climbed 35 cents to $33.23.
European banks rose sharply after the announcement. The biggest gains were among ailing Spanish banks, which some had feared would struggle to meet the new cash requirements.
Fehr said Canadian banks didn't rise on the news since they are already in a much better capital position than many of their overseas counterparts.
"It's another good reminder of the capital safety that you get when you own a Canadian bank," he said.
"They have the capital to stay in business and there's a lot of people around the world that were less sure of that with many other banking systems around the world."
In other corporate news, Air Canada (AC.B) says it hit record load factors for the month of December and for 2012 as a whole. Its load factor rose to 82.1 per cent last month while the full-year number was 82.7 per cent, up 1.1 points in each case and its shares climbed nine cents to $1.86.
Rival WestJet (TSX:WJA) said its load factor for December hit a record 81.9 per cent and its shares were two cents higher at $20.23.
