The Toronto stock market racked up a modest gain in early trading Tuesday, thanks to gold stocks which continued to recover from a severe battering earlier in the summer.
However, base metal and energy stocks weighed as economic concerns pressured oil prices and traders awaited more clarity on what the Federal Reserve may decide to do about cutting back on a key stimulus measure.
The S&P/TSX composite index gained 16.37 points to 12,604.39.
The Canadian dollar was down 0.5 of a cent to 96.19 cents US.
New York indexes were generally weak despite better-than-expected earnings from retailers Best Buy, Home Depot and J.C. Penny.
The Dow Jones industrials dipped 0.61 of a point to 15,010.13, the Nasdaq gained 10.45 points to 3,599.53 while the S&P 500 index added 1.62 points to 1,647.68.
Traders looked ahead to Wednesday and the release of the minutes from the Fed’s most recent meeting at the end of last month. A largely positive run of economic data has persuaded many investors that the central bank will start to taper its monthly bond purchases of $85-billion, starting as early as September. The stimulus program has kept long term rates low and encouraged a sharp runup on many markets this year.
The TSX gold sector ran up about two per cent while gold ticked $4.90 higher to $1,366.50 an ounce. The sector was punished along with gold prices after Fed chairman Ben Bernanke first mentioned the possibility of the Fed cutting back in May. The sector hit a recent low in late June, leaving the gold sector down about 50 per cent year to date. It has since improved and the sector is down about 30 per cent so far in 2013. Goldcorp Inc. (TSX:G) gained 53 cents to $32.56.
The base metals sector led decliners, down 0.7 per cent while copper was unchanged at $3.33 a pound. Teck Resources (TSX:TCK.B) dropped 46 cents to $27.65.
The energy sector lost 0.22 per cent while speculation over Fed intentions pushed the September crude contract on the New York Mercantile Exchange down $1.70 to $105.40 a barrel. Suncor Energy (TSX:SU) gave back 58 cents to $34.76.
Home Depot beat Wall Street expectations and raised its full-year earnings and revenue expectations. The company earned $1.8-billion, or $1.24 per share, while revenue climbed more than nine per cent to $22.52-billion. Analysts expected earnings of $1.21 per share on revenue of $21.79-billion. However, its stock gave up early pre-market gains and was down 61 cents to $74.59.
J.C. Penney Co. stock rose 56 cents to $13.78 despite another big loss on a nearly 12 per cent drop in revenue for the second quarter. It lost $586-million, or $2.66 per share while revenue reached $2.66-billion. Analysts were expecting a $1.07-per-share loss on revenue of $2.77-billion.
Best Buy shares surged $3.01 to $33.74 as cost-cutting efforts and a benefit from legal settlements led to a quarterly profit of $266-million or 77 cents a share. The biggest specialty electronics store in the U.S. said earnings ex-items were 32 cents per share against the 12 cents that analysts had expected. Revenue fell slightly to $9.3-billion from $9.34-billion last year. Analyst expected $9.13-billion.
In the resource sector, newly-merged commodities and mining group Glencore Xstrata Plc reported a near $9-billion first-half loss as it wrote down the value of its mining assets by $7.66-billion. The company said the write-down reflected “the broader negative mining industry environment” and the heightened risks of taking on some big projects. The charge was more than the $7-billion expected by most analysts and the company’s share price fell two per cent in London trading.
BHP Billiton said its annual profit dived nearly 30 per cent to $10.9-billion as slower growth in China and other emerging economies resulted in lower prices for copper, coal and iron ore.
Its bottomline was also dented by one-time charges of $922-million. Annual revenue sank nearly nine per cent to $66-billion.
BHP Billiton also said it is investing $2.6-billion to finish preparing its Jansen Potash project in Saskatchewan.
The TSX tumbled almost 150 points Monday, largely wiping out last week’s resource-sector led gain of 1.5 per cent amid economic concerns and uncertainty about what the Fed will do.
Utilities were also a major drag as the prospect of the Fed tapering its massive bond purchases sent U.S. bond yields higher. The benchmark U.S. 10-year Treasury was off 0.04 of a point from late Monday at 2.84 per cent. Bond yields have surged well over a full percentage point since Fed chairman Ben Bernanke first mentioned the possibility of the Fed cutting back in May.
Fed concerns also pressured European bourses and London’s FTSE 100 index lost 0.69 per cent, Frankfurt’s DAX fell 0.98 per cent and the Paris CAC was down 1.73 per cent.