At the open: Solid U.S. economic growth bumps TSX higher

TORONTO — The Canadian Press

(FRANK GUNN/THE CANADIAN PRESS)

Positive earnings news and better than expected economic growth figures for the U.S. pushed the Toronto stock market modestly higher Wednesday.

The S&P/TSX composite index gained 25.21 points to 12,606.96.

The loonie was down 0.17 of a cent to 96.9 cents U.S. as the Canadian economy performed weaker than expected during May. Statistics Canada reported gross domestic product grew by 0.2 per cent. Economists had looked for a 0.3 per cent rise from April.

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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 1-per-cent advance that was expected. However, first-quarter growth was revised down to 1.1 per cent from 1.8 per cent.

New York indexes were lower with traders cautious ahead of the end of a two-day meeting of the U.S. Federal Reserve on interest rates. The central bank makes its announcement at 2 p.m. EDT.

However, there was some positive employment news two days before the release of July jobs data for the U.S. Payroll firm ADP reported 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 Dow Jones industrials climbed 49.88 points to 15,570.47, the Nasdaq was ahead 18.03 points to 3,634.5 while the S&P 500 index rose 5.67 points to 1,691.63.

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 $85-billion (U.S.) of monthly 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.

Elsewhere on the earnings front, media company Torstar Corp. had $18-million (Canadian) of net income attributable to shareholders, or 23 cents per share. That was down from $32.6-million, or 41 cents per share, a year ago with its Harlequin book publishing operations especially affected by lower volumes overseas. Torstar’s total revenue was $354.9-million, down 7.5 per cent from $383.9-million.

The TSX had fallen 87 points Tuesday, led by plunging shares of big North American potash producers after a Russian-based rival broke up a European marketing group and announced plans to run at full capacity. The move by OAO Uralkali signalled that potash prices will weaken considerably.

Shares in the rival Canpotex potash marketing group were hard hit with Potash Corp. of Saskatchewan Inc. losing 16 per cent, Agrium Inc. dropped 5 per cent and in New York, Mosaic Co. tumbled 18 per cent.

Those shares continued to deteriorate Wednesday with Potash down $1.43, or 4.38 per cent, to $31.23 amid downgrades of its stock by seven firms. Agirum fell $2.15, or 2.4 per cent, to $87 and Mosaic lost $2.05, or 4.68 per cent, to $41.76 (U.S.).

The information technology sector led TSX gainers, up over 3 per cent as CGI Group Inc. posted a profit of $178.2-million (Canadian), 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 $3.14, or 9.7 per cent, to $35.47.

Rail stocks also advanced with Canadian National Railway Co. ahead 77 cents to $104.43.

Financials were also supportive as Intact Financial Corp. reported it had a smaller second-quarter profit than last year, but exceeded analyst estimates following several recent catastrophes that will result in millions of dollars of payouts by the insurance company. The Toronto-based property and casualty insurance 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 $2.64 to $61.38.

Commodity prices were higher as the September crude contract in New York was up 15 cents to $103.23 (U.S.) a barrel. The energy sector was up 0.3 per cent and Canadian Natural Resources Ltd. improved by 50 cents to $32.16 (Canadian).

Talisman Energy Inc. reported a $27-million loss from operations, or 3 cents per share, in the quarter, down from a year earlier profit of $71-million, or 7 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 32 cents to $11.62.

The base metals sector fell 0.7 per cent while September copper rose 3 cents to $3.07 (U.S.) after falling 7 cents Tuesday. Teck Resources Ltd. fell 22 cents to $24.17 (Canadian).

The gold sector was down 0.3 per cent as December bullion shed early gains following the release of the positive jobs and economic growth data, falling $1.90 to $1,322.90 (U.S.) an ounce.

Meanwhile, Facebook Inc.’s stock has passed its IPO price of $38, marking the first time the stock has risen above that mark since its rocky initial public offering in May, 2012. Its shares rose 45 cents to $38.08.

The world’s biggest online social network has been on a roll since it reported stronger-than-expected earnings on July 24. Investors are upbeat about its fast-growing mobile advertising revenue.

The TSX is ending July trading with a gain of about 3.7 per cent on the month, leaving the Toronto market up 1.2 per cent year-to-date. Gains during July were paced by a gain of 4.5 per cent in the energy sector as oil prices firmed above $100 a barrel amid a series of sharp inventory drops in the U.S.

The gold sector is up about 8 per cent, leaving the component down about 39 per cent year-to-date, an improvement from a 50-per-cent drop registered earlier. Base metal miners were also attractive to investors and the sector gained 1 per cent for July, but is still down 29 per cent for the year-to-date.

European bourses were mixed with London’s FTSE 100 index up 0.8 per cent, Frankfurt’s DAX declined 0.3 per cent and the Paris CAC 40 was down 0.12 per cent.

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