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The close: Stocks sharply lower, BlackBerry plunges

Blackberry logos and flags are seen at the company’s offices in Waterloo, Ont.

Matthew Sherwood/The Globe and Mail

The Toronto Stock Exchange fell sharply Friday amid news that smartphone maker BlackBerry Ltd. is cutting 4,500 jobs and will post a substantial loss next week when it reports its latest quarterly earnings.

The S&P/TSX composite index dropped 120.31 points to 12,806.47, while the Canadian dollar lost 0.35 of a cent to 97.10 cents US.

Shares in Waterloo, Ont.,-based BlackBerry (TSX:BB) closed down 16.08 per cent, or $1.74, at $9.08 on the Toronto Stock Exchange.

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BlackBerry says it expects to post a loss of between $950-million (U.S.) and $995-million when it reports its second-quarter earnings next Friday.

Most of that will come from a massive writedown of up to $960-million it will take from poor sales of its new smartphone devices that went on the market earlier this year. It will also book a $72-million restructuring charge related to changes in its operations, which include previous layoffs.

BlackBerry also said it's reducing the number of devices in its portfolio from six devices to four. Half of the lineup will be marketed towards higher-end consumers, while the other two will be for entry-level customers, it said.

On Wall Street, markets were also lower with the Dow Jones industrials down 185.46 points at 15,451.09, the Nasdaq off 14.66 points at 3,774.73 and the S&P 500 down 12.42 points to 1,709.92.

The BlackBerry news came on the same day that tech giant Apple Inc. began worldwide sales of its two newest smartphone models – the iPhone 5C and the pricier iPhone 5S. Shares in Apple (Nasdaq:AAPL) fell one per cent, or $4.89, to close at US$467.41.

Meanwhile, Allan Small, a senior investment adviser with DWM Securities, said the markets have kind of lost their way because anticipation on Fed tapering is over for now, and the Syrian crisis is on the back burner as a result of diplomatic efforts to defuse tension over its chemical weapons stockpiles.

"The market now is sitting around saying, OK so now what? What do we have to focus on?" said Small. "The market is kind of pausing. It doesn't really know which way to go."

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Many traders had expected the U.S. Federal Reserve to start pulling back on its $85-billion a month asset purchase program, which had been put in place following the 2008 financial crisis to keep long-term rates low. But instead, the U.S. central bank said it would continue to buy the mortgage bonds and Treasurys because of continuing worries about the pace of the economic recovery.

The Fed will meet next in October and again in December. A decision on tapering the so-called quantitative easing program could be made on either occasion.

"Either way, the taper is coming. It's going to happen at some point. Anyone who tries to figure out when the next taper is, that's a fool's game," said Small.

"The message is very simple. Whether the Fed tapers today, tomorrow or next year, the message is that interest rates are on the rise. That's the bottom line."

Meanwhile, trading volume on the TSX ballooned to 650 million shares. On average, the TSX sees a range of 280 million to 330 million shares traded each day.

All sectors were lower except for telecom, which saw an uptick of 0.27 per cent.

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The gold sector was the leading decliner, as it fell 5.45 per cent. Shares in Agnico Eagle Mines (TSX:AEM) dipped nearly six per cent, or $1.74, to $27.70 as December bullion dropped $36.80 to $1,332.50 an ounce.

The metals and mining sector was down 2.63 per cent, as December copper dipped three cents to $3.32 pound. The energy sector pulled back 0.27 per cent as the November crude fell $1.11 to $104.75 a barrel.

In economic news, Statistics Canada reported that the national annual inflation rate slowed to 1.1 per cent in August, from 1.3 per cent in July. The Bank of Canada's core inflation index was 1.3 per cent in August compared with 1.4 per cent in July.

The inflation numbers were in line with economists' expectations and remain near the low end of the central bank's target range. As a result, the Bank of Canada is expected to keep its key short-term rates unchanged.

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