The Toronto stock market was flat late morning Friday as oil prices continued to hover around 15-month highs and traders took in earnings from American banking giants JPMorgan Chase and Wells Fargo that beat expectations.
The S&P/TSX composite index inched up 0.12 of a point to 12,493.38. The tepid showing followed a jump of almost 200 points the previous session in the wake of reassurances from U.S. Federal Reserve chairman Ben Bernanke that the central bank was in no hurry to curtail key economic stimulus measures.
The Canadian dollar was off 0.06 of a cent at 96.23 cents US after gaining 1.2 cents Thursday.
U.S. indexes were slightly higher, building on record highs racked up by the Dow industrials and S&P 500 after Bernanke said that the U.S. needs “highly accommodative monetary policy,” or low interest rates, for the foreseeable future. The Fed is buying $85-billion a month in bonds to keep interest rates low.
The Dow Jones industrials were ahead 15.33 points at 15,476.25.
The Nasdaq gained 5.12 points to 3,583.42 after the index advanced 58 points to its highest level since October 2000. However, it remains well below the all-time high of 5,048 it reached on March 10, 2000. Meanwhile, the S&P 500 edged up 0.29 of a point to 1,675.31.
“(Bernanke)is very consciously trying to avoid a repetition of the mistakes made in 1994 (when) his predecessor Alan Greenspan took the markets by surprise, increased rates and the bond and stock markets had a very difficult year,” said Robert Gorman, chief portfolio strategist at TD Waterhouse.
“And I think Bernanke knows the U.S. economy could ill afford (that sort of a surprise) at this stage.”
Traders also digested a softening in U.S. consumer confidence. The University of Michigan’s index unexpectedly slipped to 83.9 from 84.1 amid rising mortgage rates and gasoline prices.
JPMorgan Chase, the biggest U.S. bank by assets, made US$6.1-billion in the second quarter after stripping out payments to preferred shareholders. That was up 32 per cent from the same period a year ago and amounts to $1.60 per share, beating estimates by 16 cents. Revenue in the period grew by 14 per cent to $25.2-billion, higher than the $24.9-billion forecast by analysts.
Despite the surge in profits, JPMorgan CEO Jamie Dimon said in a statement that loan growth remained soft. The bank’s shares edged up 14 cents to $55.28, near their highest level in more than a decade. The stock has gained 25 per cent this year.
And Wells Fargo posted earnings of US$5.5-billion or 98 cents a share, beating estimates by five cents. Revenue was $21.4-billion versus $21.18-billion a year ago. Wells Fargo is the biggest U.S. mortgage lender, but with mortgage rates rising sharply in recent weeks analysts are concerned about the potential impact on the bank’s mortgage business.
Its shares were ahead 71 cents to $42.60.
Elsewhere in the financial sector, Scotiabank (TSX:BNS) said Friday that it has withdrawn its application to acquire a 19.99 per cent stake in China’s Bank of Guangzhou. The bank said in a statement that “since announcing the proposed investment in September of 2011 Scotiabank and the City of Guangzhou have re-evaluated the proposed partnership in light of changing conditions.” Scotiabank shares rose 24 cents to C$57.18.
Industrials led advancers, up 1.2 per cent. Railway stocks advanced despite a warning from credit rating agency Moody’s that it expects the deadly train disaster in Lac-Megantic, Que., to make shipping oil by rail more costly, putting pressure on both major railways and oil producers. Canadian National Railways (TSX:CNR) rose $1.93 to $105.94 while Canadian Pacific (TSX:CP) was $2.34 higher at $131.89.
The telecom group rose 0.7 per cent as BCE Inc. (TSX:BCE) climbed 39 cents to $43.92.
The gold sector led decliners with a 1.45 per cent slide as August bullion backed off $2.70 to US$1,277.20 an ounce. Barrick Gold Corp. (TSX:ABX) faded 31 cents to C$15.64 and Kinross Gold Corp. (TSX:K) gave back six cents to $5.08.
The base metals sector was down just over one per cent with copper prices depressed after China’s finance minister suggested that growth could come in at seven per cent for this year, which is below the government’s official forecast.
China releases April-June growth figures on Monday morning and that could well determine trading next week.
The September copper contract on the New York Mercantile Exchange lost two cents to US$3.15 a pound and Teck Resources (TSX:TCK.B) declined 31 cents to C$23 while HudBay Minerals (TSX:HBM) slipped eight cents to $6.91.
The energy sector drifted 0.07 per cent lower as signs of higher demand in the U.S. pushed the August crude contract on the Nymex up 17 cents to US$105.08 a barrel. Suncor Energy (TSX:SU) gave back 38 cents to C$32.59.
In other corporate news, vaccine developer Medicago Inc. (TSX:MDG) is selling a majority stake to Japan’s Mitsubishi Tanabe Pharma in a friendly transaction valued at $357-million. Mitsubishi Tanabe will pay $1.16 in cash for each of the company’s outstanding shares other than those indirectly held by Philip Morris International. That’s a 22.1 per cent premium to Thursday’s closing price.
Paper company Domtar Corp. (TSX:UFS) says it expects to post an operating loss of between US$30-million and US$35-million when it reports its second-quarter results later this month. Its shares fell $3.75 to $72.50.
London’s FTSE 100 index rose 0.03 per cent, Frankfurt’s DAX gained 0.61 per cent and the Paris CAC 40 slipped 0.3 per cent.
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