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TSX exits July trading with across-the-board loss, ends month higher

TORONTO – The Toronto stock market closed lower Wednesday as July trading came to a close with losses across most sectors despite positive U.S. economic data.

Market reaction to the end of a two-day Federal Reserve meeting was muted as the central bank — as widely expected — offered no clues as to when it might start to wind down a key bit of stimulus.

The S&P/TSX composite index dropped 95.11 points to 12,486.64 as the U.S. Federal Reserve said it would carry on with its monthly $85 billion of bond purchases and that rates will remain unchanged near zero.

Traders think it is far more likely the Fed will move towards tapering the purchases at its next meeting in September.

The loonie was ahead 0.28 of a cent to 97.35 cents US as the greenback further weakened following the Fed announcement mid-afternoon. However, bond yields were little changed with the benchmark U.S. 10-year Treasury at 2.65 per cent.

The currency had been lower earlier after other data showed that Canadian gross domestic product grew by 0.2 per cent that month. Economists had looked for a 0.3 per cent rise from April.

The growth picture was better in the U.S., where GDP grew at an annualized rate of 1.7 per cent during the second quarter, higher than the one per cent advance that was expected.

The Fed also said economic growth increased at a modest rate since the last meeting, a slight downgrade from the moderate pace that was assessed at the last meeting in June.

But some analysts thought the difference in wording was too slight to matter.

“None, I don’t think there is any (difference),” said Colin Cieszynski, a market analyst at CMC Markets Canada.

“I know they’re trying to send some sort of signal (but) I think some people read too much into those things.”

New York indexes were generally lacklustre as the Dow Jones industrials lost 21.05 points to 15,499.54, the Nasdaq was ahead 9.9 points to 3,626.37 while the S&P 500 index slipped 0.24 of a point to 1,685.72.

There has been much speculation surrounding the Fed over the last two months, since chairman Ben Bernanke first mentioned that the central bank could start to taper its bond purchases later this year if economic conditions warrant. This key piece of economic stimulus is credited with keeping long term rates low and fuelling a strong rally on markets.

“I think they want to wait for more economic data and Bernanke seems pretty dovish,” said Cieszynski.

“The September meeting would seem to be a particularly opportune time if they’re going to start tapering.”

Traders are now focusing on Friday and the release of the July non-farm payrolls report.

Payroll firm ADP reported Wednesday that private sector employment increased by a better than expected 200,000 during this month. Economists expect the economy cranked out about 190,000 jobs during July.

The base metals sector led decliners, down 1.5 per cent while September copper rose eight cents to US$3.12, more than making up for Tuesday’s seven-cent drop. Teck Resources (TSX:TCK.B) fell 33 cents to C$24.06.

The gold sector fell about 1.2 per cent as December bullion shed early gains following the release of the positive jobs and economic growth data, falling $11.80 to US$1,313 an ounce. Barrick Gold Corp. (TSX:ABX) gave back 72 cents or 4.06 per cent to C$17.

The telecom sector was down 1.2 per cent with Rogers Communications (TSX:RCI.B) down 85 cents to $41.04.

Financials also weighed, down 0.75 per cent as Scotiabank (TSX:BNS) lost 76 cents to $58.01.

Intact Financial Corp. (TSX:IFC) exceeded analyst estimates following several recent catastrophes that will result in millions of dollars of payouts by the insurance company. The company had 89 cents per share of net operating income, down from $1.35 a year earlier but 16 cents a share better than anticipated and its shares ran up $1.67 to $60.41.

The energy sector was slightly lower as the strong U.S. GDP showing helped push the September crude contract in New York up $1.95 to US$105.03 a barrel even as U.S. inventories increased by 400,000 barrels last week. Analysts had looked for a three-million-barrel decline.

But inventories have declined 30 million barrels over the past month.

Talisman Energy (TSX:TLM) reported a $27 million loss from operations, or three cents per share, in the quarter, down from a year earlier profit of $71 million or seven cents per share. Analysts polled by Thomson Reuters had recently lowered their estimates for Talisman to less than a cent per share of adjusted earnings.

Talisman also revised its 2013 production guidance to the lower end of estimates and its shares fell 30 cents to $11.64.

The information technology sector led TSX gainers, up 3.9 per cent as CGI Group Inc. (TSX:GIB.A) posted a profit of $178.2 million or 56 cents per share for the third quarter, up from $87.2 billion or 33 cents per share last year. Revenue was up to $2.57 billion from $1.06 billion and its shares jumped $3.17 or 9.8 per cent to $35.50.