The Toronto stock market was lower Friday amid strong earnings from the tech sector while commodity prices eased on concerns over Chinese moves to reform its industrial sector.
The S&P/TSX composite index lost 38.19 points to 12,630.95.
Celestica Inc. (TSX:CLS) was a bright spot on the TSX, up 80 cents or 8.2 per cent to $10.58 after the electronics manufacturing company posted net income of $28.0-million, or 15 cents per share, up from $23.6-million, or 11 cents per share, a year earlier. Adjusted earnings were 21 cents a share, four cents better than analysts expected.
The Torongo-based global company knew it would take a hit from losing BlackBerry (TSX:BB) as a customer as a result of the smartphone company’s slimmed-down strategy. As it turned out, Celestica’s revenue was $1.495-billion (U.S.) – down 14 per cent from a year earlier but up three per cent if BlackBerry were excluded.
The Canadian dollar was off of 0.33 of a cent to 97.1 cents US.
U.S. indexes were sharply lower despite data showing consumer sentiment at a six-year high. The University of Michigan’s consumer confidence index came in at 85.1 for July.
The Dow Jones industrials down 116.73 points to 15,438.88, the Nasdaq composite index dropped 16.53 points to 3,588.66 and the S&P 500 index gave back 11.14 points to 1,679.11.
There are concerns that an overhaul of China’s industrial sector could cause a sharp slowdown in the world’s second-largest economy.
Beijing has ordered companies to close factories in 19 industries from steel to glass where overproduction has led to price-cutting wars, affirming its determination to push ahead with a painful makeover of the economy. That move followed weak manufacturing data on Wednesday.
Commodities were lower as demand concerns pushed September copper down nine cents to $3.10 (U.S.) a pound. The mining sector pushed ahead 0.6 per cent as Teck Resources (TSX:TCK.B) advanced for a second day following earnings that beat expectations, up 65 cents to $25.06.
The resource sector has been the worst performer this earnings season, largely because of falling commodity prices amid a weak global economy.
“But the thing there is that the numbers on the face of it aren’t good, but they are surprisingly ahead of expectations,” said Robert Gorman, chief portfolio strategist at TD Waterhouse.
“Teck is a classic example here in Canada. Bottom line is that their earnings were about half what they were a year or so ago. But the stock had been crushed going into this and has started to firm up a bit.”
The gold sector led decliners, down one per cent while August bullion gained $13.80 to $1,315 (U.S.) an ounce. Barrick Gold Corp. (TSX:ABX) faded 20 cents to C$17.76. The sector had been down about 50 per cent earlier in the month as bullion prices retreated on speculation about the future of economic stimulus measures in the U.S.
The September crude contract on the New York Mercantile Exchange down $1.38 to $104.11 a barrel and the energy sector was down 0.4 per cent. Canadian Natural Resources fell 65 cents to $33.05.
Elsewhere on the earnings front, TransCanada Corp (TSX:TRP) says it had $365-million or 52 cents per share of net income attributable to shareholders in the second quarter, up from $272-million or 39 cents per share a year earlier. On an adjusted basis, the Calgary based company had $357-million or 51 cents per share of “comparable earnings,” up from $300-million or 43 cents per share in the second quarter of 2012 and in line with analyst estimates and its shares were 11 cents lower to $46.30.
The TSX looks set to end the week flat or even with a decline following weak earnings reports from the resource sector, in particular from Cenovus Energy (TSX:CVE) and PotashCorp (TSX:POT) in a reflection of falling commodity prices.
The telecom sector has also been negative this week, despite a strong earnings report from Rogers Communications (TSX:RCI.B) as investors mull the effects of a possible entry into the sector by U.S. telco Verizon Communications.
Bell has joined major telecom companies Rogers and Telus in calling for Ottawa to change its policy on foreign ownership of small Canadian wireless companies.
The three Canadian rivals say they have been put at an unfair disadvantage that allows foreign carriers like Verizon to buy small Canadian wireless carriers while denying them the same opportunity.
But both the TSX and New York indexes have racked up solid gains this month, with the Dow and S&P 500 establishing a string of record highs on positive economic data and earnings. The Toronto market is back in positive territory for the year as investors bought up oversold mining stocks and insurers led a strong gain in financials as bond yields started to rise in response to speculation about whether the Fed will start to cut back on a key stimulus measure.
Next week’s meeting of the U.S. Federal Reserve will be closely watched for any clue as to when the central bank might be thinking of trimming it $85-billion a month of bond purchases, a move that has kept long-term rates near record lows and supported a strong stock market rally.
But Fed chair Ben Bernanke has indicated the Fed could start cutting back on those purchases later this year if the economy improves sufficiently.
Next week will also see the release of reports on second-quarter gross domestic product, the health of the manufacturing sector and the week ends with the release of the U.S. non-farm payrolls report.
European bourses were mixed with London’s FTSE 100 index down 0.7 per cent, Frankfurt’s DAX was down 0.92 per cent while the Paris CAC 40 gained 0.36 per cent.