North American equity markets opened mixed, with U.S. stocks edging slightly higher but the TSX slipping into negative territory amid weakness in commodity prices - especially gold and silver.
In the opening minutes of trading, the S&P/TSX composite index was down 2 points, or 0.01 per cent, at 12,468; the S&P 500 was up 3 points, or 0.2 per cent, at 1,462; and the Dow Jones industrial average was up 18 points, or 0.1 per cent, at 13,409.
The February gold futures contract was down 2 per cent in New York, or $34 an ounce, at $1,640.60 (U.S.) and silver was down 2.9 per cent at $29.83. They had been down by more than a percentage point further earlier this morning.
The selloff in precious metals was ignited by revelations Thursday contained in the minutes of the Federal Reserve's December policy meeting that it is eyeing the possible end to quantitative easing measures before the end of 2013.
Quantitative easing, or creating money to buy financial assets, could end “well before the end of 2013” because of concerns by several policy makers over financial stability, and that the Fed’s portfolio of assets – now over $2-trillion (U.S.) – is becoming too large, according to the minutes.
The minutes said “almost all” members of the policy committee were wary that the benefits of ongoing asset purchases no longer outweigh the potential costs, suggesting the Fed will reverse course on QE at the earliest opportunity.
The extraordinary economic stimulus over the last four years has fuelled much of gold's rally, making it appear more attractive as an inflation hedge. Gold is also priced in U.S. dollars, which makes it cheaper to buy in foreign currency terms when the U.S. dollar is under pressure. The lifting of the Fed's bond buying program could very well lead to a stronger greenback.
But this morning's U.S. jobs report suggested the Fed won't be in a huge rush to turn off the stimulus taps. American employers added 155,000 positions last month, as the unemployment rate held at a four-year low of 7.8 per cent. While that represents a steady pace of hiring, it falls short of the approximate 200,000 jobs a month economists say the U.S. economy needs to create to meaningfully decrease the stubbornly high unemployment rate.
That helped commodities to come off their lows and has eased concerns on Wall Street about less monetary stimulus in coming months.
The Canadian employment report came in much stronger than expected, with 40,000 new job gains. Economists were looking for only 5,000 new jobs, and the unemployment rate dipped to a four-year low of 7.1 per cent. That news ignited a rally in the Canadian dollar, which is now up for the day after earlier this morning sliding against the greenback. The loonie is up about one-third of a cent at 1.0148 per U.S.
Other U.S. economic data this morning was mixed. The U.S. Institute for Supply Management's non-manufacturing index for December came in at 56.1, better than the reading of 54.3 economists had expected. Factory orders were flat in November, missing expectations for a 0.3 per cent rise.
Here's a look at some stocks moving on early news:
Shares in Lululemon Athletica Inc. are down nearly 5 per cent after Credit Suisse downgraded the stock to "neutral" from "outperform" and cut its price target to $80 from $86. It cited concerns over slowing comparable-store sales growth in Canada and margin pressures.
Mosaic Co. shares are up nearly 2 per cent after reporting adjusted earnings per share of $1.05 in its latest quarter, beating the average analyst forecast of 94 cents. Revenues of $2.54-billion missed expectations for $2.57-billion.
Eli Lilly and Co. shares are up 2.5 per cent after the drug maker forecast adjusted 2013 earnings of between $3.75 and $3.90 per share on $22.6-billion to $23.4-billion in revenue. Analysts had expected earnings of $3.72 per share on $22.87 billion in revenue.