Canadian Stocks Fall as Oil Prices Decline, U.S. Dollar Rallies

Canadian stocks fell for a third day as energy and metal producers declined after the U.S. dollar strengthened, curbing commodities’ appeal as an alternative investment.

Canadian Natural Resources Ltd, the country’s second largest energy company by market value, fell 3 percent as oil dropped below $90 a barrel. Barrick Gold Corp. fell 1.5 percent after the price of the metal declined as much as 0.7 percent before recovering. Valeant Pharmaceuticals International Inc. rallied 19 percent after the drugmaker forecast higher 2011 earnings than analysts estimated.

The Standard & Poor’s/TSX Composite Index dropped 84.32 points, or 0.6 percent, to 13,311.67 at 4:05 p.m. in Toronto. The benchmark of Canadian stocks closed at a two-year high on Dec. 29.

“Economic data is improving at light speed and this gives confidence the U.S. dollar will maintain its own,” said Barry Schwartz, who helps manage about C$390 million ($392 million) at Baskin Financial Services Inc. in Toronto. “We’ve had a terrific move in the commodities space. It’s hard to imagine commodities are going to go that much higher. It’s possible people overreacted to the growth that’s expected.”

Canadian stocks declined in the past two days as gold slumped on a stronger dollar and data signaling a recovery in the U.S. economy may curb demand for the metal as an alternative investment and protection of wealth. The S&P/TSX surged 14 percent in 2010 as the price of gold jumped 30 percent. Eight of the world’s 20 largest gold producers are Canadian.

Canadian Business Spending

A gauge of Canadian business spending, the Ivey Purchasing Managers Index, fell to 50 last month from 57.5 in November. The average forecast of economists surveyed by Bloomberg was 54. Readings above 50 meaning purchasing increased. A labor market report for Canada due tomorrow at 7 a.m. is expected to show the unemployment rate was 7.7 percent in December, up from 7.6 percent in the prior month.

The Dollar Index, a gauge of the U.S. currency versus six major peers, rallied for the fourth straight day. The index rose 0.7 percent after U.S. Labor Department data showed the average number of applications for jobless benefits over the past four weeks dropped to 410,750, the lowest level since July 2008. A government report tomorrow is forecast to show the unemployment rate slipped to 9.7 percent in December from 9.8 percent as the U.S. economy added 150,000 jobs.

Canadian Natural Resources fell 3 percent to C$42.95, while Suncor Energy Inc. slipped 2.9 percent to C$37.14. Oil for February delivery declined 2.1 percent to $88.38 a barrel in New York, as energy companies dropped 1.6 percent, the biggest decline of the 10 groups in the S&P/TSX.

Gold

Gold prices slipped for a third day raw material stocks declined 1.3 percent. Barrick Gold, the world’s largest producer of the metal, dropped 1.5 percent to C$49.07. The shares have had the biggest three-day drop since December 2009.

“There’s a total collapse in the large-cap gold stocks,” Schwartz said. “Those that viewed gold as an alternative currency to the U.S. dollar may be heading toward the exits on the back of expectations for big job growth. We’ve turned the tide in job creation both in the U.S. and Canada.”

Valeant Pharmaceuticals rallied 19 percent, the most since September 2005, to C$35.45. The Mississauga, Ontario-based drugmaker forecast earnings in 2011 of at least $2.25 a share, beating the average estimate of $2.21 from analysts in a Bloomberg survey. The company was the top performer in the Standard & Poor’s/TSX Composite Index, and propelled a gauge of health care stocks to an 11 percent gain.

Research In Motion

Research In Motion Ltd. slipped 0.8 percent to C$61.20 after the BlackBerry maker gained 4.5 percent yesterday. Research in Motion’s share of the smartphone platform market fell to 33.5 percent from 37.6 percent in August, according to a report by research ComScore Inc.

Potash Corp. of Saskatchewan Inc., the world’s largest fertilizer producer, rallied 4.4 percent to C$168.52, its highest level since September 2008. The stock has gained for the past eight days. Rival Mosaic Co. reported second-quarter profit this week that beat analysts’ estimates as phosphate prices and potash sales soared. UBS AG analyst Brian T. MacArthur raised his estimate for Potash’s U.S. traded shares to $185 from $165.

To contact the reporter on this story: Inyoung Hwang in New York at ihwang7@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net.

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