The Toronto stock market erased early losses to deliver a solid advance Thursday afternoon following a string of declines amid concerns about the role of central banks in supporting the economic recovery.
The S&P/TSX composite index started the day off in negative territory but by mid-afternoon was up 131.03 points to 12,240.92 amid a stock upgrade for BlackBerry, acquisition news in the consumer sector and gains in defensive stocks that have been beaten down lately.
The Canadian dollar was ahead 0.39 of a cent to 98.31 cents US amid lower commodity prices.
U.S. indexes also turned higher after losing ground for most of this week following positive readings on retail sales and claims for jobless benefits. The Dow Jones industrials climbed 119.53 points to 15,114.76, the Nasdaq rose 33.5 points to 3,433.93 and the S&P 500 index was up 15.92 points to 1,6288.44.
The U.S. Commerce Department said retail sales increased 0.6 per cent in May compared with April. That’s up from a 0.1 per cent gain the previous month and the fastest pace since February. The April gain was led by a 1.8 per cent jump in auto sales, the biggest increase in six months.
And the number of Americans seeking unemployment benefits dropped 12,000 last week to a seasonally adjusted 334,000.
Central bank worries have pressured markets with the TSX registering triple-digit slides in each of the last two sessions.
Worries about central banks have been growing ever since Federal Reserve chief Ben Bernanke said on May 22 that the Fed might pull back on its US$85-billion-a-month bond-buying program, known as quantitative easing, if economic data improves, especially hiring.
The QE program has fuelled a strong rally on U.S. markets.
“The markets have become more and more dependent on the steroids that the central banks across the globe are providing,” said Kash Pashootan, vice-president and portfolio manager at First Avenue Advisory, a Raymond James company.
“And it takes more and more now for the market to become intoxicated.”
Also, Japanese media reports are saying overseas hedge funds may be dumping the country’s equities following disappointment over the Bank of Japan’s decision earlier in the week to refrain from additional monetary easing measures.
Those reports helped send Tokyo’s Nikkei 225 index plunging 6.4 per cent, while the yen strengthened 1.5 per cent against the greenback.
In April, the Bank of Japan announced a massive stimulus in an attempt to get inflation up to two per cent. The euphoria that drove the Nikkei up to five-year highs has been followed by wild fluctuations. The index is now around 20 per cent down from its May 23 peak, leaving the market in bear market territory.
The tech sector was the leading percentage advancer, up 2.22 per cent as BlackBerry improved by 75 cents to $14.62 after Societe Generale raised its rating on the stock to “buy” from “sell,” saying channel checks show the Canadian smartphone maker’s new devices are selling well.
The company earlier this year introduced the Z10, which has a touch-screen, and the Q10, which targets BlackBerry loyalists with a physical keyboard.
The consumer staples sector rose 1.83 per cent after Empire Company Ltd. and its main subsidiary, Sobeys Inc. announced Wednesday after the close that they are buying rival Canada Safeway Ltd. for $5.8-billion in cash. Empire shares jumped $6.84 or 10.12 per cent to $74.45.
Telecoms and utilities were also positive after registering sharp declines earlier in the week.
Speculation about cutting back on the QE program has had the effect of pushing U.S. Treasury yields sharply higher, which in turn has had a negative effect on TSX defensive/interest-rate sensitive sectors such as REITS, utilities, telecom and pipeline stocks.
“It’s sort of a warning bell for interest-sensitive securities because many don’t realize how sensitive these are,” Pashootan said.
“And you’re getting that enhanced yield (from those stocks) because there is the potential for volatility.”
Telus Corp. ran up $1.02 to $34.69 while Algonquin Power & Utilities rose 12 cents to $7.36.
Commodity prices were mixed and the base metals sector was the leading advancer, up 1.77 per cent as July copper lost four cents to US$3.18 a pound. Teck Resources was up 57 cents to C$24.63.
Financials gained 1.3 per cent while TD Bank climbed $1.48 to $82.30.
The energy sector was ahead 0.4 per cent as the better than expected U.S. economic data helped push the July crude oil contract up 24 cents to US$96.12 a barrel on the New York Mercantile Exchange. Canadian Natural Resources was 39 cents higher at C$29.39.
The gold sector led TSX decliners, down 1.45 per cent as August bullion on the Nymex fell $14.20 to US$1,377.80 an ounce. Barrick Gold Corp. faded 57 cents to C$19.62.
In other corporate news, shares in Transat A.T. Inc. ran up 63 cents or 11.86 per cent to $5.94 as the travel company posted a net loss of $22.8-million or 59 cents per share in the quarter ended April 30. On an adjusted after-tax basis, Transat lost $1.43-million or four cents per share, which was far better than the 26 cents per share loss estimated by analysts.