Wall Street stocks opened deep in the red this morning but Canada’s TSX only saw modest losses, as shares in telecom stocks rallied after the Globe and Mail reported that Verizon Communications Inc. may be cooling on the idea of entering Canada.
The U.S. 10-year Treasury spiked to its highest level since 2011 after the U.S. reported more improvement in its labour market, signalling that the U.S. Federal Reserve may be very near to scaling back the size of its massive $85-billion-per-month bond-buying program.
The Globe reported Verizon is putting off the potential acquisition of both Wind Mobile and Mobilicity, the two struggling carriers that are for sale. After tabling a $700-million preliminary offer for Wind and signing a non-disclosure agreement with Mobilicity in recent months, Verizon has now decided to delay pursuing those deals until after a government auction of wireless licences in January, according to Globe sources.
Instead, Verizon will focus on deciding whether to participate in the upcoming auction of the 700 megahertz frequency, considered the most valuable airwaves that have ever come up for bidding in Canada. If Verizon enters the auction and wins the spectrum it wants, it could then look at potentially bidding for Wind and Mobilicity at some point next year.
In early trading, shares in BCE Inc. were up 1.8 per cent at $42.53 on the TSX and Telus shares were up 5.3 per cent at $32.40. Shares in Rogers Communications Inc. were up 4.2 per cent at $44.00.
The gains ran counter to the broader market, as Wall Street saw sharp declines after a number of U.S. economic reports this morning. In early trading, the S&P 500 was down 22 points, or 1.3 per cent, at 1,662 and the Dow Jones industrial average was down 207 points, or 1.3 per cent, at 15,130.
In Toronto, the telecom sector was up 1.4 per cent, keeping the S&P/TSX composite index’s losses much more limited, with the index down 58 points, or 0.4 per cent, at 12,580.
The 10-year U.S. bond yield was at 2.80 per cent and had risen as high as 2.82 per cent this morning. Dividend stocks and other income-producing securities such as real estate investment trusts are especially vulnerable to a pullback when rates rise. Canada's largest REIT, RioCan, was down 0.7 per cent.
Among economic reports, traders appeared to focus most on U.S. jobless claims for last week, which dipped 15,000 to 320,000 last week, more than expected. That was the lowest level since October 2007. Inflation data continued to show only modest increases in consumer prices. The consumer price index rose 0.2 per cent in July, as expected, and slower than June's gasoline-driven 0.5 per cent gain.
News on the corporate front also set a negative tone in the U.S., as Wal-Mart Stores Inc. cut its annual profit outlook and Cisco Systems Inc. released weaker-than-expected sales late Wednesday. Wal-Mart shares were down 1.9 per cent and Cisco was down 7 per cent.
Commodities were generally trading lower, with gold futures down 0.4 per cent and crude oil down 0.1 per cent. But shares in Suncor Energy Inc. were up 1.2 per cent after Warren Buffett's Berkshire Hathaway disclosed that it bought around $500-million shares in the Canadian oil-sands producer.