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Stocks lose early momentum amid RIM profit-taking, positive Caterpillar earnings

TORONTO - The Toronto stock market closed little changed Monday, held back by a wave of profit-taking on Research In Motion (TSX:RIM) shares while mining and energy stocks failed to benefit from rising commodity prices.

The S&P/TSX composite index dipped 0.71 of a point to 12,815.91, while the TSX Venture Exchange was off 9.36 points at 1,217.88.

The Canadian dollar was unchanged at 99.35 cents US. It had earlier flirted with a six-month low around the 99-cent mark.

Still, the dollar has tumbled 1.39 cents US since the Bank of Canada indicated last Wednesday that it will be slower to raise interest rates than had been expected because of economic weakness.

The dollar has been supported in recent months partly on sentiment that the central bank might hike rates later this year. Data released Friday showing low inflation in Canada at the end of 2012 further suggested that investors will have to wait longer for the central bank to move. Higher rates tend to attract investors and push up the currency.

U.S. indexes lost early momentum as a disappointing housing sector report competed with a well received earnings report from heavy equipment maker Caterpillar Inc. and data showing higher than expected durable goods orders in December.

The Dow Jones industrials gave back 14.05 point to 13,881.93 as the National Association of Realtors said its seasonally adjusted index for pending home sales dropped 4.3 per cent to 101.7 in December. That’s still 6.9 per cent higher than it was a year ago. Sales were held back by a limited supply of available homes.

The Nasdaq gained 4.59 points to 3,154.3 and the S&P 500 index was 2.78 points lower at 1,500.18.

U.S. durable goods orders rose by a greater than expected 4.6 per cent in December. That was more than double the consensus forecast for a two per cent gain.

Caterpillar's fourth-quarter profit fell 55 per cent to US$697 million, or $1.04 a share. Revenue dropped seven per cent to US$16.08 billion but still beating estimates of $16 billion. Ex-items earnings were $1.91 per share versus expectations of $1.69, and its shares were up 1.96 per cent to US$97.45 in New York.

The lacklustre performance on North American markets on Monday followed solid gains through most of January, pushed along by a stronger than expected string of U.S. fourth-quarter earnings reports. The TSX gained 0.7 per cent last week while the Dow industrials ran ahead 1.8 per cent.

"The markets are probably a little ahead of themselves, capturing the relief that we didn’t have great protracted political battles in the U.S.," said Chris King, portfolio manager at Morgan, Meighen and Associates, referring to the so-called fiscal cliff and raising the U.S. debt ceiling.

"All the while, we know that the U.S. economy is improving (and) China is turning around. And what is most encouraging, we’re seeing fund flows back into equities like we haven’t seen going back more than a decade."

The Canadian corporate earning season kicks into gear this week with some of Canada's biggest companies reporting.

Canadian Pacific Railway (TSX:CP) and grocer Metro Inc. (TSX:MRU.A) report earnings results on Tuesday while Potash Corp. of Saskatchewan (TSX:POT) and Canadian Oil Sands (TSX:COS) hand in numbers on Thursday.

Elsewhere on the corporate front, Research In Motion Ltd. (TSX:RIM) unveils its new BlackBerry 10 product line in New York on Wednesday. Its stock has been on a tear lately amid optimism about the new lineup, rising 50 per cent in January and 12 per cent last week alone. However, its stock fell 7.61 per cent to $16.27 Monday on profit-taking.

The financial sector was up 0.5 per cent even as Moody’s Investors Service downgraded the long-term senior debt ratings of six big Canadian financial institutions — Bank of Montreal (TSX:BMO), Bank of Nova Scotia (TSX:BNS), CIBC (TSX:CM), TD Bank (TSX:TD), Caisse centrale Desjardins, and National Bank (TSX:NA)— by one notch.

Moody’s says the downgrade reflects ongoing concerns about the banks’ exposure to the "increasingly indebted Canadian consumer," while elevated housing prices have left the banks "more vulnerable to unpredictable downside risks facing the Canadian economy than in the past."

The telecom sector gained 0.82 per cent with Rogers Communications (TSX:RCI.B) ahead 76 cents to $47.02 while Telus Corp. (TSX:T) rose 66 cents to $65.69.

The gold sector was down about one per cent as February bullion stepped back $3.70 to US$1, an ounce. Au Rico Gold Corp. (TSX:AUQ) shed 16 cents to C$6.96 while Kinross Gold Corp. (TSX:K) faded 22 cents to $8.36.

The mining sector also helped depress the TSX, down 0.58 per cent as March copper on the New York Mercantile Exchange rose one cent to US$3.66 a pound. Thompson Creek Metals (TSX:TCM) dropped nine cents to C$4.10 and Turquoise Hill Resources (TSX:TRQ) declined 15 cents to $8.25.

The energy sector was slightly lower even as oil prices advanced, with the March crude contract ahead 56 cents to US$96.44 a barrel. Talisman Energy (TSX:TLM) lost 17 cents to C$11.87 while EnCana Corp. (TSX:ECA) dropped 17 cents to $19.54.

Economic news will also hopefully provide some direction for traders.

In the U.S., the Federal Reserve wraps up its two-day meeting on interest rates Wednesday. No one expects the central bank to move on rates but traders will look for clues as to when the Fed might end its latest round of economic stimulus.

The key piece of data for the week comes out Friday. Economists generally expect the U.S. non-farm payrolls report to show that the economy created 153,000 jobs in January, slightly below December's 155,000 reading.

Traders will also take in the latest readings on economic growth in Canada and the U.S. during the week.


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