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At midday: Dow down sharply; TSX telecom stocks rise

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The Toronto stock market pulled back Thursday and the Dow fell nearly 200 points, as a mixed picture emerged on the U.S. economy and expectations rose that the U.S. Federal Reserve will begin its tapering plan next month.

The S&P/TSX composite index was down 45.49 points to 12,593.81 near midday.

The Canadian dollar was fell 0.07 of a cent to 96.75 cents US.

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On Wall Street, the Dow fell 196.75 points to 15,140.91, the Nasdaq dropped 55.15 points to 3,614.12 and the S&P 500 slid 21.30 points to 1,664.09.

The sharp decline came as some good news emerged about the U.S. economy. Weekly applications for unemployment benefits dropped to a six-year low of 320,000.

Improved sentiment also pushed U.S. Treasury yields higher as traders anticipated the Fed will reduce its $85-billion-a-month monetary stimulus in September, a move that is expected to lead to a rise in the cost of borrowing. The yields hit two-year highs above 2.8 per cent.

But not all the news was positive on the U.S markets, as Wal-Mart (NYSE:WMT) added to the sentiment that retailers are in for a tough last half of the year. The big-box retailer cut its outlook for the year and reported disappointing quarterly numbers, just as department store Macy's did on a day earlier.

In commodities, the September crude contract rose 71 cents to $107.56 (U.S.) a barrel as supply concerns returned following the renewed unrest in Egypt.

December gold bullion dropped $3.20 to $1,330.20 an ounce. September copper fell three cents to $3.31 a pound.

Telecom stocks were the leader on the TSX, rising 3.5 per cent, after a report in the Globe and Mail said Verizon is setting aside its pursuit of smaller wireless players Wind Mobile and Mobilicity, choosing to wait until after a government wireless spectrum auction in January.

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Telus stock was the biggest gainer of the pack, rising 5.4 per cent to $32.39.

Meanwhile, Yellow Media Ltd. (TSX:Y) said the chairman of its board of directors will take on the CEO's role temporarily as the publishing company continues to search for a permanent replacement for Marc Tellier, who vacates the position Thursday. Shares of the company rose nine cents to $12.29.

In Europe, many countries were on holiday, though markets remained open. Germany's DAX was down 1.3 per cent at 8,325.65 while the CAC-40 in France fell 0.8 per cent to 4,080.54.

The FTSE 100 index of leading British shares was down 1.9 per cent at 6,465 even after figures showed retail sales in the country surged by a monthly rate of 1.1 per cent in July, nearly double market expectations for a 0.6 per cent rise.

Earlier in Asia, Japan's Nikkei 225 index tumbled 2.1 per cent to close at 13,752.94. Hong Kong's Hang Seng was flat at 22,539.25. Australia's S&P/ASX 200 fell 0.1 per cent to 5,152.40.

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