TSX DROPS AMID FEARS OF U.S FRAGILITY

The Toronto stock market closed lower Thursday amid doubts about how long the U.S. Federal Reserve will keep up its stimulus programs aimed at supporting what is still a fragile economic recovery.

The S&P/TSX composite index was down 70.33 points at 12,470.44, led by a loss of almost 3% in the gold sector, while the TSX Venture Exchange eased 13.67 points to 1,226.17.

The Canadian dollar lost 0.29¢ to US101.21¢.

New York markets also closed in the red after the latest minutes from the U.S. Federal Reserve’s latest policy meeting showed that policymakers expressed broad support for the Fed’s plan to buy bonds to support the U.S. economy.

But there was a split among its members over how long to continue the bond purchases. Some of its 12 voting members thought they would continue through this year, while others thought they should be slowed or stopped before the end of 2013.

Those governors were concerned that the continued bond purchases, known as quantitative easing, would destabilize the economy.

“Given the minutes, it seems that the odds don’t favour QE3 lasting into 2014, let alone making it all the way to the end of this year,” said BMO Capital Markets senior economist Michael Gregory.

The Dow Jones industrials closed down 21.19 points to 13,391.36.

The Nasdaq composite index slipped 11.69 points to 3,100.57 and the S&P 500 was down 3.05 points to 1,459.37.

Indexes had been largely little changed until the release of the Fed minutes midafternoon, holding onto solid gains racked up in a relief rally Wednesday sparked by a last-minute deal to avert big tax hikes and spending cuts in the United States.

But there had been little enthusiasm to extend Wednesday’s advances as the deal between the White House and Congress left unresolved several budget measures, mainly government spending cuts.

A last-minute deal by U.S. lawmakers late Tuesday triggered a global market rally on Wednesday even while traders worried that U.S. budget talks could pose a threat to risk appetite for months.

For one thing, while the New Year’s Eve deal settled tax rates it only postponed automatic spending cuts to defence and domestic programs for two months. And it didn’t include any significant deficit-cutting agreement, meaning the country still doesn’t have a long-term plan on how to curb spending.

On top of that, the U.S. government also faces what are likely to be tough negotiations over raising the country’s debt limit in early March.