Toronto stocks fell across the board to end lower on Friday as concerns about higher interest rates and political uncertainty overshadowed buoyant commodity prices, which normally would have supported the market. The Toronto Stock Exchange's S&P/TSX composite index closed down 38.29 points, or 0.41 percent, at 9,367.49. On the week, the index rose 0.97 percent. Volume was 171 million shares worth C$3.14 billion. Inflation data released on Friday, coupled with strong retail sales this week, sparked talk that the Bank of Canada may raise interest rates sooner rather than later.
"Investors keep changing expectations of when rates are going to rise in Canada," said Elvis Picardo, chief market strategist at Global Securities in Vancouver.
Statistics Canada said the annual inflation rate in March rose to 2.3 percent from 2.1 percent in February, in line with expectations. The Bank of Canada's measure of core inflation ticked up to a nine-month high of 1.9 percent.
Investors also have been preoccupied by talk of another federal election as early as June as the minority Liberal government struggles to avoid defeat at the hands of opposition parties over a cash-for-favours scandal.
A report that North Korea could be preparing for a nuclear weapons test also overhung sentiment.
That combination of news fuelled the cautious tone on the Canada's main exchange and overshadowed sturdy commodity prices.
Crude oil jumped back above $55 a barrel, fueled partly by refinery outages that could strain US supplies.
Gold prices closed near a one-month high in New York, boosted by a weaker US dollar and concerns about slowing US economic growth.
Picardo said corporate earnings results were taking a back seat as investors reacted more to event news, but that may change once companies begin to report in earnest.
"But the focus at this point is not on Q1 earnings, it's on what the companies are saying for the rest of the year, and so far the news hasn't been that great," he said.
"Not too many companies have come out and said, 'We're going to have a fantastic year ahead.' And that's really hurting sentiment."
All of the TSX's 10 main subgroups ended down, led by a 1.43 percent drop in the tech sector. Health-care issues lost 1.04 percent while industrials dropped 0.92 percent.
Profit-taking hit the tech sector with Research In Motion down C$2.20, or 2.65 percent, at C$80.95, Cognos Inc was down C$1.29, or 2.55 percent, at C$49.20 and Nortel Networks dipped 3 Canadian cents, or 0.89 percent, to C$3.33.
Among energy stocks, Penn West Petroleum fell C$1.49, or 1.68 percent, to C$87.01, while Canadian Natural Resources closed down 62 Canadian cents, or 0.93 percent, at C$66.37.
The country's No 2 oil explorer said on Friday it will amend its hedge policy on conventional crude oil to ensure enough free cash flow to fund its Horizon oil sands project in northern Alberta.
It also said it expects 2005 cash flow of C$4.8 billion to C$5.1 billion and a profit of C$1.5 billion to C$1.7 billion.
Market momentum was narrowly positive with 693 advancers and 650 decliners. The blue chip S&P/TSX 60 index fell 2.4 points, or 0.46 percent, to 520.61.
In New York, the Dow Jones industrial average reversed course to end down 60.89 points, or 0.60 percent, at 10,157.71, after Thursday's spectacular rise of more than 200 points. The Nasdaq composite index fell 30.22 points, or 1.54 percent, to finish at 1,932.19.