By Jennifer Twan
Reuters
Tuesday, June 6, 2006

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TORONTO (Reuters) - Toronto stocks ended lower on Tuesday, taking a hit from softer commodity prices and continued worries over U.S. interest rates, which hurt the market for a second straight session.

Adrian Mastracci, investment counsel at Vancouver’s ‘fee-only’ KCM Wealth Management, says, “We're showing some cracks, maybe some fatigue.”

The Toronto Stock Exchange S&P/TSX composite index closed down 33.35 points, or 0.29 percent, at 11,666.14, adding to Monday's drop of nearly 200 points.

Inflation worries continued to ripple through markets on both sides of the border, which saw the Dow dip below 11,000 for the first time in three months, and on inflation comments made on Monday by U.S. Federal Chairman Ben Bernanke.

Bernanke said the U.S. central bank needs to ensure inflation stays under control, even as the U.S. economy starts to show signs of a slowdown.

"Yesterday, of course, Bernanke made some comments that sound like stagflation," said Peter Gibson, market strategist at Desjardins Securities. "That's what people are worried about."

The prospect of higher U.S. interest rates pushed the U.S. dollar higher, which was likely the main cause for a decline in the gold prices, he added.

A rise in the U.S. currency makes gold more expensive for holders of other currencies.

Overall, five of the TSX index's 10 main sectors were down, led by a 1.6 percent drop in the materials group, home to major mining companies, including the gold subsector.

The gold group ended down 2.4 percent and was the day's biggest loser. Shares of Agnico-Eagle Mines Ltd. were off C$1.76, or 4.8 percent, at C$34.78, while Alamos Gold Inc. was down 47 Canadian cents, or 5.5 percent, at C$8.12.

"We're showing some cracks, maybe some fatigue," said Adrian Mastracci, investment counsel and president at KCM Wealth Management Inc. in Vancouver.

Market volatility is likely to continue and investors should get used to it, Mastracci added.

Energy issues slipped 0.38 percent as July crude prices settled 10 cents lower at $72.50 a barrel.

Shares of EnCana Corp. slid 14 Canadian cents to end at C$55.60, while Nexen Inc. dropped 25 Canadian cents to C$60.72.

In corporate news, Telecoms equipment maker Nortel Networks Corp., which has been plagued by three earnings restatements in as many years, posted a bigger first-quarter loss as it was hit by sluggish sales and higher expenses.

Nortel shares closed down 6 Canadian cents or 2.4 percent at C$2.48.

TSX Group Inc. Chief Executive Richard Nesbitt said on Tuesday the exchange is looking to buy, invest in or partner with an exchange in the United States.

TSX Group shares ended the day down 46 Canadian cents or 0.9 percent at C$46.00

Market volume was 293 million shares worth C$5.2 billion, with decliners easily outpacing advancers 1,037 to 497. The blue chip S&P/TSX 60 index closed down 0.08 points, or 0.01 percent, at 655.73.

The Dow Jones industrial average closed down 46.58 points, or 0.42 percent, at 11,0002.14, after falling below 11,000 for the first time since March. The Nasdaq composite index ended down 6.84 points, or 0.32 percent, at 2,162.78.

($1=$1.11 Canadian)

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