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The Toronto stock market stepped back late Friday morning, led by declines in commodity stocks at the end of a positive week.

New York markets were also in the red as investors focus on more troubles in the U.S. mortgage sector.

Toronto's S&P/TSX composite index dropped 33.13 points to 13,476.42.

The TSX is headed for a gain of around 200 points for the week as commodity prices surged, including oil which closed above US$100 a barrel earlier in the week.

"Overall, the market hasn't done badly since the lows hit on Jan. 21 where we were up about 10 per cent or so over the last month," Jennifer Dowty, portfolio manager at MFC Global Investment Management.

"We had a lot of sharp gains, especially in the resource sector. Things are a bit different because China is now the largest consumer of a lot of these materials and that's why I believe this resource rally that we're seeing is sustainable going forward."

Investors also took in a major acquisition. U.S.-based First Reserve Corp. is buying oil and gas industry helicopter service company CHC Helicopter Corp. (TSX: FLY.A) in a deal valued at $3.7 billion.

"That's another thing I think is going to help support the marketplace – a lot of companies are flush with cash and a lot of our Canadian assets are extremely attractive and it's attracting bids for these companies," added Dowty.

CHC shares, halted at the opening, later soared 41 per cent to $30.96.

The TSX Venture Exchange was down 20.3 points to 2,640.51.

The Canadian dollar was down 0.18 of a cent to 98.7 cents US after a mixed retail showing for December.

Overall sales rose 0.6 per cent to about $35.1 billion, in large part on the strength of a 3.2 per cent rise in auto sales. Excluding auto sales, retail sales fell 0.4 per cent, against the 0.3 per cent gain economists had expected.

Statistics Canada also reported that retailers sold about $412.2 billion worth of goods and services in 2007, up 5.8 per cent over 2006.

"After a string of very weak reports for December, today's retail sales result is a modest dose of relief, even if ex-auto sales dipped," said BMO Nesbitt Burns deputy chief economist Doug Porter.

"However, even with the moderate gain in real retail sales, it still looks like December GDP fell heavily (possibly as much as minus 0.5 percentage points) due to the earlier reported steep declines in exports, wholesale trade, housing starts and manufacturing sales in the month."

On Wall Street, the Dow Jones industrial average moved down 54.3 points to 12,230 after losing 143 points Thursday as weak economic data reinforced worries that the U.S. is either in recession or sliding into one.

The Nasdaq composite index moved down 17.14 points to 2,282.64 while the S&P 500 index fell 7.31 points to 1,335.22.

Markets had received earlier lift after the U.S. producer price index for November was revised to a rise of 2.6 per cent. December PPI was revised to a 0.3 per cent dip from a 0.1 per cent drop.

This was good news to investors worried that high inflation recently could force the U.S. Federal Reserve to moderate interest rate cuts.

But investors are also concerned about the effects of the credit crisis, spawned by securities linked to U.S. mortgages that have sharply deteriorated.

On Friday, U.S $1500 payday loan. government-sponsored mortgage provider Freddie Mac was downgraded to "sell" by Merrill Lynch on fears it faces continued headwinds amid the credit crisis.

On the TSX, the financials sector was a weight, down 0.3 per cent with Royal Bank (TSX: RY) off 45 cents to $49.94 a day after the bank announced it would acquire Phillips, Hager & North Investment Management Ltd. , a Vancouver-based mutual fund and asset management company, in exchange for 27 million common shares currently worth $1.36 billion.

The base-metals sector was down 0.7 per cent with Teck Cominco (TSX: TCK.B) off 35 cents to $35.58 and Ivanhoe Mines (TSX: IVN) giving back 35 cents to $11.33.

The energy sector drifted 0.3 per cent as oil prices slumped.

The April crude contract on the New York Mercantile Exchange moved down 13 cents to US$98.10 a barrel after closing above $100 a barrel for the first time earlier this week.

Penn West Energy Trust (TSX: PWT.UN), Canada's largest energy trust, says its fourth-quarter profit rose three per cent to $127 million before two major acquisitions were completed last month. Its units gained 14 cents to $28.54.

Gold prices were off after hitting a record intraday high Thursday. The April bullion contract on the Nymex dipped $2.80 to US$946.40 an ounce and the gold sector was down 1.6 per cent.

Kinross Gold Corp. (TSX: K) shares dipped 49 cents to C$23.35 after the firm reported a fourth-quarter profit of US$173.1 million, up from US$41 million a year ago, helped by a higher price for gold.

Quarterly revenue was US$284.1 million, up from $231.4 million in the last three months of 2006.

Kinross produced 384,598 ounces of gold in the quarter, up from 362,028 ounces a year earlier. Sales totalled 356,329 ounces, down from 375,684.

The average realized price of gold was US$796 per ounce, up from $615.

In other earnings news, Rogers Communications Inc. (TSX: RCI.B) shares were down 30 cents to $38.70 even as Canada's largest operator of cellphone and cable TV systems reported a 44 per cent increase in fourth-quarter profit to $254 million, with solid growth in its wireless, cable and media divisions.

Revenue was $2.69 billion in the October-December period, up 13 per cent from a year earlier.

Shares in Bombardier Inc.(TSX: BBD.B) were unchanged at $5.72 after the transportation giant authorized formal sales proposals for its new CSeries aircraft, a major step toward a program launch this year.

The CSeries, with five seats abreast, is designed for the lower end of the 100- to 149-seat market segment.

Two months after its $1.35-billion initial public offering, Franco-Nevada Corp. (TSX: FNV) has announced a $232.5-million issue of new equity.

The Toronto-headquartered resource-sector royalty and investment company's main asset is a royalty portfolio purchased for US$1.2 billion from Newmont Mining Corp. Its shares fell $1.10 to $21.60.

Overseas, London's FTSE 10 index eased 42.3 points to 5,889.9.

Frankfurt's DAX 30 lost 121.37 to 6,783.48 while the Paris CAC 40 lost 55.08 points to 4,803.77.

In Hong Kong, the Hang Seng Index fell 317.96 points, or 1.4 per cent, to 23,305.04.

Tokyo's the Nikkei 225 fell 187.82 points, or 1.37 per cent, to 13,500.46.

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