Gold Helps Toronto Stocks
TORONTO—The stock market got a boost Tuesday, when it closed higher – helped along by the recovery in gold stocks which suffered tremendous losses during summer. However, economic concerns pertaining to the Federal Reserve’s moves on cutting back on its bond portfolio pressured traders to be bearish on oil prices. Market indicators saw gains of 82.09 points in the S&P/TSX composite index which more than made up for Monday’s 149 point dive.
Other market indicators pointed to Dow Jones Industrial lose 7.75 points to 15,002.99 that wiped out early gain, Nasdaq’s gain 24.5 points to 3,613.59, and S&P 500 index gain of 6.29 points to 1,652.35. Traders looked forward to the result of the Fed’s meeting that was held last month. The buoyant market trend was due to investor confidence that the Fed will cut down on its $85,000 bond portfolio starting September. This program resulted in keeping long term markets low and increasing runoffs on other financial instruments this year.
The chief investment officer of the Bisset Investment in Calgary said, “ The outcome of the Fed’s program on bond purchases had taken center stage, and the seasonality factor plays a great part in stock price movement. Summer is a season of the doldrums, and the bourses normally do not earn at this time. What is happening, is that everybody is focusing on what is in front of them. So, the Fed’s buyout program plays a central interest on everybody’s mind now.”
The TSX gold sector markedly improved which saw an increase of 3.75 per cent, with gold prices up by $6.90 to reach US$1, 372 per ounce. The gold sector nose dived when Fed Chairman Ben Bernanke first mentioned of the Fed cut back in May this year. This announcement left the gold sector down by 50 percent. It has since improved by being 30 per cent down most recently. “The rebounding of gold prices have been seen the last five or six weeks,” Aitken added. Another gainer was Goldcorp Inc. (TSX: G) that gained 86 cents to C$32. 89.
Among other sectors, utilities were up 0.75 cents. This sector and other interest sensitive instruments have been in the doldrums as the prospect of Fed decreasing its bond holdings sent bond yields higher in the U.S. The U.S. 10 year Treasury was down 0.06 points or at 2.82 per cent since last Monday. Despite this scenario, bond yields have gone up a full percentage point after Bernanke’s remarks in May. Other indicators include Just Energy Group (TSX: JE) that increased 16 cents to $6.32. The energy sector of the New York Mercantile Exchange was down by $2.14 to $104.96 a barrel. On the other hand, Canadian Natural Resources (TSX: CNQ) were up 29 cents to C$30. 96.
Other performers in the market include the financial groups which were up by 0.6 per cent, with Royal Bank (TSX: RY) among the gainers of 65 cents to $64.67. The base metal sectors climbed up to 0.52 per cent, while copper went up by a penny to $3. 34 a pound. Turquoise Hill Resources (TSX: TRQ) rose by 19 cents to C$5. 30, and Teck Resources (TSK : CK.B) was down 57 cents to $27.54. In the mining sector, BHP Billiton reported that annual profit decreased by 30 per cent to $10.9 billion – as a result of the slowdown in the economies of China among others, which led to lower prices for copper, iron ore, and coal. Annual revenue dived down to nearly nine per cent to $66 billion.
Home Depot surpassed all expectations when the company earned US$1. 8 billion, or an earnings per share (EPS) of $1.24, while revenue increased to more than nine percent to $22.52 billion . These figures were higher than the projections of EPS $1.21 and annual revenues of $21.79 billion. However, despite favorable performance outcome – stocks were down by 91 cents to $74.30. J.C. Penny, encountered a loss of around 12 percent for the second quarter. The amount of loss equated to $586 million or $2.66 per share, while gross revenue reached $2.66 billion. Projections for EPS loss is $1.07 with a revenue of $2.77 billion. Despite this loss, stocks rose 77 cents to $13.99.
Best Buy, an electronics retailer, had an EPS of 32 cents in the last quarter, better than the projected EPS of 12 cents. Most of the earnings came from cost cutting and increase revenues due to online sales. This brought about the increase in its share of $4.03 or 13 percent to $34.76. In Canada, the retail sectors – Sears Canada (TSX: SCC) is said to be laying off 245 workers in its head office in Toronto – mostly in the information technology and finance departments. Its stock dipped 73 cents to $12.77.