Dollar at 3-year low after BoC’s rate Call

• The Toronto stock market closed lower Wednesday as the initial run of earnings from the big Canadian banks failed to impress and persuaded investors to take some profits from a sharp run-up in banks and insurers this year.

The S&P/TSX composite index lost 14.95 points to 13,304.92 with losses held in check by rising mining stocks.

National Bank of Canada shares shed early gains and was down $1.37 to $89.53 after it posted $337-million in quarterly net income, adding up to a full-year profit of $1.55-billion. Ex-items, the bank had $370-million of adjusted net income, or $2.09 per share, up 8% from $1.93 a share a year ago, which met expectations. National Bank is also upping its quarterly cash dividend by 6% to 93¢ and also announced plans for a two-for-one stock split.

“[The earnings] have been OK, they’re reasonably close to expectations, raising dividends and [there is] never anything wrong with that,” said Colin Cieszynski, market analyst at CMC Markets Canada.

“But the banks have moved up quite a bit and, on that basis, sometimes people are using this as an excuse to take some money off the table.”

Overall, the financial sector was the biggest drag on the TSX as investors lowered expectations ahead of earnings coming out this week from the rest of the big banks.

Bank of Montreal shares fell 4.5% Tuesday, even as earnings beat expectations. Investors were disappointed with, among other things, weakness in its U.S. operations. BMO shares were down another 30¢ to $69.95 Wednesday, while Bank of Nova Scotia dropped 49¢ to $63.70.

But analysts say that banks were vulnerable to some profit taking prior to the release of BMO’s results. Both the bank and the overall financial sector were up over 20% year to date.

At the same time, the Canadian dollar fell to lows not seen for more than three years as the Bank of Canada’s rate announcement left markets with the impression that interest rate hikes are still a long way off.

The loonie was down US0.26¢ to US93.65¢ after the bank left its key rate unchanged at 1%.

U.S. indexes were mainly lower as traders balanced positive economic data with concerns about the Federal Reserve cutting back on monetary stimulus. The Dow Jones industrial average shed 24.85 points to 15,889.77, Nasdaq was up 0.8 of a point to 4,038, while the S&P 500 index was down 2.34 points at 1,792.81.

While the data is another sign of an improving economy, analysts believe a report showing continuing, steady employment gains could persuade the Fed that it’s time to start cutting back on its US$85-billion of monthly bond purchases.

The Fed’s stimulus has supported a strong performance in global stock markets during the past few years. But tapering those asset purchases could work the opposite way. The gold group jumped almost 3%, while February bullion ran ahead US$26.50 to US$1,248.20 an ounce.

The energy sector was slightly higher as the January crude contract on the New York Mercantile Exchange gained US$1.16 to US$97.20 a barrel.