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Deborah Baic/The Globe and Mail

The Toronto stock market moved lower Wednesday as commodity prices weakened and traders looked forward to the U.S. Federal Reserve's latest take on the economy.

The S&P/TSX composite index declined 30.37 points to 12,243.45 after closing Tuesday at a two-month high while the TSX Venture Exchange dipped 11.33 points to 1,530.9.

The Canadian dollar was down 0.37 of a cent to 97.96 cents US.

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U.S. markets were also negative with the Dow Jones industrial average down 53.81 points to 12,408.66.

The Nasdaq composite index slipped 0.71 of a point to 2,701.79 while the S&P 500 declined 4.52 points to 1,287.56.

The Fed releases its so-called Beige Book mid-afternoon, providing a snapshot of economic conditions from across the United States. Traders hope the data will reinforce the belief that the U.S. will be able to avoid slipping back into recession.

Recent economic reports have raised hopes. Data released in the past week showed manufacturing expanding at a faster than expected pace while employment gains for December beat expectations, showing the economy created 200,000 jobs last month.

And while that is reassuring, it's far below what the U.S. economy needs to sustain growth.

"We need to see 275,000 jobs a month for the next two years to get back the jobs lost during the recession (and) we're not even at the average of 275,000," said Gareth Watson, vice president investment management and research at Richardson GMP Ltd.

Watson said he's worried that recent signs of growth "have been driven by the American consumer leveraging up again and at some point that will run out."

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Watson added that it's not just enough for the Fed to create the right monetary policy, but politicians have to work together to create mechanisms to help create jobs and assist small businesses and entrepreneurs.

"But very little will be accomplished between now and next January because you have an election but then you have a lame duck session."

The TSX energy sector led decliners, down 1.23 per cent while oil prices moved lower as the European Union's efforts to block imports of Iranian oil appear to be stalling.

Tension between Iran and Western powers over Iran's nuclear program has helped keep crude above US$100. However, prices edged down Wednesday after the EU's plan to ban purchases of Iranian oil in hopes of choking off funding for the country's nuclear program were bogged down by issues such as exemptions for existing supply contracts.

The February crude contract on the New York Mercantile Exchange lost $1.14 to $101.10 barrel. Canadian Natural Resources (TSX:CNQ) lost 64 cents to $38.87.

Ivanhoe Energy Inc. (TSX:IE) subsidiary Sunwing Zitong Energy is selling its interest in production from the Zitong block gas discovery in China's Sichuan Basin to Royal Dutch Shell for up to US$160 million. Its stock ran up a penny to $1.17.

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The base metals component dropped 0.36 per cent as March copper was unchanged at US$3.51.

Traders were also encouraged by strong revenue figures and a positive outlook from resource giant Alcoa Inc.

First Quantum Minerals (TSX:FM) was down 61 cents to $22.49 while Teck Resources (TSX:TCK.B) gained 19 cents to $38.84.

The gold sector was slightly lower while bullion prices headed higher for a second day and February gold gained $12.80 to US$1,644.30 an ounce. Iamgold (TSX:IMG) gave back 15 cents to $17.53.

The industrial sector helped provide lift to the TSX.

Shares in Canadian Pacific Railway (TSX:CP) rose 73 cents to $69.40 as the Globe and Mail ran a story about former Canadian National Railways president and CEO Hunter Harrison. He said he's optimistic about the possibility he could take the reins at CP. Harrison has been proposed as the next CEO of CP by Bill Ackman, who has bought a 14.2 per cent stake in the railway.

European markets were in the red with London's FTSE 100 index was off 0.68 per cent, Frankfurt's DAX shed 0.38 per cent and the Paris CAC 40 dipped 0.61 per cent.

On the corporate front, Magna International Inc. (TSX:MG) shares gained 17 cents to $38.49 after it raised sales predictions by as much as eight per cent in 2012. The auto parts maker is looking to new markets for growth, and targets operating margins at about five per cent, an improvement over the scaled back predictions of 4.75 per cent made for 2011.

Hostess Brands Inc., the maker of Twinkies and Wonder Bread, is filing for bankruptcy protection, blaming troubles with its pension and medical benefits obligations, increased competition and tough economic conditions. The Chapter 11 filing on Wednesday comes just two years after a predecessor company emerged from bankruptcy proceedings.

Newspaper and multimedia company Postmedia Network (TSX:PNC.A) reported first-quarter net earnings grew to $28.3 million, from $6 million a year ago, helped by the sale of three daily newspapers. However, revenues slipped nine per cent to $231.1 million, mostly on lower print advertising revenue and its shares fell 86 cents to $6.50.

Viterra Inc. (TSX:VT) says its benefits from the new rules eliminating the Canadian Wheat Board's monopoly will be modest in 2012 but become more significant in following years. Its shares gained 15 cents to $10.87.

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