TSX dropS 100 poinTS; BMO TumBleS 4.5%

The Toronto stock market closed sharply lower Tuesday as investors reacted negatively to the latest earnings report from the Bank of Montreal and pushed other financial stocks lower ahead of reports from all the big banks this week.

The S&P/TSX composite index fell 99.7 points to 13,319.87 with losses spread over most sectors. Traders also are cautious ahead of economic data later in the week that could give a better idea of where the Federal Reserve is headed in cutting back on stimulus measures.

Bank of Montreal’s annual net profit hit a record $4.2-billion in 2013.

That included $1.088-billion of net income in the fourth quarter, which was up 1% from a year earlier. Its adjusted net income fell 2% from a year ago to $1.102-billion or $1.64 a share.

That beat forecasts of $1.58 a share but Barclays observed that “BMO reported a $121-million gain in Wealth Management that is not recurring and will not likely be treated as core (earnings) in the market.”

“This represents roughly 19¢ a share and would take BMO’s core number to $1.45, well below consensus.”

BMO’s return on equity also dropped to 15% versus 15.6%. Its stock fell $3.28 or 4.46% to $70.25. But prior to Tuesday morning, BMO stock was up more than 20% from its 52-week low, leaving the shares vulnerable to a bit of profit-taking.

“It’s a small blip,” said Allan Small, senior investment advisor with Holliswealth.

“It wasn’t anything earth shattering and so, when you have a run-up as we have seen, especially in the last couple of quarters of the main banks and you have an earnings report that doesn’t kind of jibe with the rest of the run-up, this is what you’re going to get.”

The bank’s quarterly dividend will be increased by 2¢ to 76¢ per common share.

The Canadian dollar was down 0.07 of a cent at US93.91¢ a day before the Bank of Canada makes its next interest rate announcement.

U.S. indexes also were weak as the Dow Jones industrials dropped 94.15 points to 15,914.62, the Nasdaq dipped 8.06 points to 4,037.2 and the S&P 500 slipped 5.75 points to 1,795.15.

There is lot of U.S. economic data coming out this week, culminating with the release of the government’s employment report on Friday.

A strong employment report would raise concerns that the Fed is set to start tapering its US$85-billion of monthly bond purchases that have kept U.S. interest rates low and persuaded many investors to seek higher returns in the stock market.

Economists forecast that the American economy cranked out about 175,000 jobs in November, down 5,000 from October.

The TSX financial sector lost 1.57%. Other banks reporting this week and under selling pressure included CIBC, which lost $1.04 to $90.34 while Scotiabank declined $1.16 to $64.19.

Industrials fell 1.4% with Canadian Pacific Railway down $3.39 to $163.17.

The gold sector was also a drag, down 1.37% as February gold gave back $1.10 to US$1,221.70 an ounce. Goldcorp lost 49¢ to C$22.25.