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TSX slips amid solid RBC results, remarks by Yellen at Fed conference

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TORONTO - The Toronto stock market closed lower Friday as the financial sector failed to find lift from record earnings at Canada's biggest bank.

The S&P/TSX composite index dropped 20.54 points to 15,535.55

The profit amounted to $1.64 per share on an adjusted basis, eight cents ahead of estimates.

Royal Bank (TSX:RY) also increased its quarterly dividend by four cents to 75 cents a share. Its shares were down 86 cents to $80.80 but briefly hit an all-time high of $82.15 in initial trading. Royal's stock has surged more than 13 per cent this year.

The other major Canadian banks report next week and "it’s set up for them pretty well to make some money," said Gareth Watson, vice-president, investment management and research, Richardson GMP.

"I think it’s been a similar theme for the past few quarters, in which we’ve had decent equity and bond markets, (so) you should have good capital markets, decent wealth management performance."

The Canadian dollar was unchanged at 91.37 cents US as the consumer price index declined 0.2 per cent month over month in July and retail sales for June jumped 1.1 per cent.

U.S. markets were mainly lower as U.S. Federal Reserve chairwoman Janet Yellen offered no signal that she’s altered her view that the economy still needs Fed support from interest rates that have been near zero since the financial crisis.

The Dow Jones industrials fell 38.27 points to 17,001.22, while the Nasdaq gained 6.45 points to 4,538.55 and the S&P 500 index edged 3.97 points lower to 1,988.4.

The central bank chief also said at the Fed’s annual conference in Jackson Hole, Wyo.,that the Great Recession complicated the Fed’s ability to assess the U.S. job market and made it harder to determine when to adjust interest rates. She noted that while the unemployment rate has steadily declined, other gauges of the job market are harder to assess and may reflect continued weakness.

The Fed has been generally expected to raise rates mid-2015 but there are concerns the Fed may move even earlier.

Yellen reminded her audience that rate hikes could come sooner than expected if progress in the labour market continued to be more rapid than anticipated or if inflation moves up more rapidly.

Rising rates are seen as a drag for the stock markets since some investors would choose to invest their money in securities with a guaranteed return, like bonds.

The TSX energy sector was flat while October crude fell 31 cents to US$93.65 a barrel.

The base metals component gained 0.22 per cent as September copper rose three cents to US$3.20 a pound.

The gold sector was off about 0.15 per cent as December bullion in New York closed up $4.80 to US$1,280.20 an ounce, reflecting the debate at the Fed about when to hike rates and reports that NATO had expressed alarm over the buildup of Russian forces near Ukraine.

North American markets finished higher this week with the TSX ahead 1.51 per cent and the Dow industrials up 2.03 per cent. Sentiment was helped in part by strong housing and manufacturing data in the U.S. and also reassurance from the Fed that it is in no hurry to raise interest rates.

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