Stock markets in Toronto and New York closed lower on Friday, as oil prices slipped back below $30 US a barrel and retail sales data in Canada showed signs of slowing consumer demand.

In Toronto, the benchmark stock index fell 118 points, or 0.9 per cent, to close at 12,813. Prior to Friday, the S&P/TSX composite index had advanced for four straight sessions.

Most subgroups were down, led by financials, health care and energy.

Retail sales figures for the month of December fell 2.2 per cent from a month earlier, well below forecasts of a 0.9 per cent drop. With consumer spending responsible for two-thirds of economic activity, that raised concerns that growth would falter. 

In New York, the Dow Jones industrial average closed with a loss of 22 points, or 0.1 per cent, at 16,392.  The financial, energy and industrial sectors were the main decliners in New York, while consumer stocks rose. 

U.S. inflation came in higher than expected in January. "The inflation numbers definitely caught the markets off guard," said Joseph Lavorgna, a senior economist at Deutsche Bank in New York.
"Last week at this time the market was pricing a 25 per cent chance of a rate hike by year-end and now it's over 40 per cent and that's largely because of today's stronger than expected CPI."

Oil futures dropped $1.13 to settle at $29.64 US a barrel, partially reversing the rally of the past few days. Oil prices fell after the U.S. released data showing record inventories of crude oil in storage.

Gold gains

Bullion prices continued their recent march higher as investors sought safety in the precious metal. Gold futures rose $4.30 to settle at $1,230.40 US an ounce.

The Canadian dollar fell a tenth of a cent to close at 72.63 cents US. Inflation reports in both Canada and the United States showed the cost of living accelerating in both countries.

Some currency analysts see a weakening in the factors that have helped the loonie rise recently. 

"Most drivers of [the Canadian dollar's] recent strength appear to be losing momentum, with a slowdown in the narrowing of yield spreads, an increasingly tentative market tone, and renewed fears surrounding the near-term path for oil," said a commentary from Scotiabank foreign exchange analyst Eric Theoret. 

The annual inflation rate in Canada rose to 2.0 per cent in January, as the price of imported fruits and vegetables jumped because of the low loonie.  

With files from Reuters