The Toronto stock market closed modestly higher Tuesday amid worries that a bipartisan deal hammered out in the U.S. senate to increase the debt ceiling and forestall a possible default could fail because of demands from the Republican-controlled House of Representatives.
The S&P/TSX composite index gained 39.35 points to 12,931.46, two days before the U.S. hits its borrowing limit, at which point the government would start to run out of money to pay creditors.
The Canadian dollar was down 0.24 of a cent to 96.34 cents US as the greenback moved higher alongside rising U.S. Treasury bond yields.
U.S. indexes finished sharply lower with the Dow Jones industrials down 133.25 points to 15,168.01. The Nasdaq was 21.26 points lower at 3,794.01 and the S&P 500 index points shed 12.08 points to 1,698.06.
There had been a growing sense of optimism after Democrat majority leader Harry Reid and Republican Senate leader Mitch McConnell came close to carving out an agreement that would permit the Treasury to borrow normally until early to mid-February. It would also reopen the government through Jan. 15.
The plan is a far cry from the assault on Obamacare that Tea Party Republicans originally demanded as a condition for a short-term funding bill to keep the government fully operational and a further increase in the debt ceiling.
Now, negotiations in the Senate are on hold while it awaits a plan from the House Republican leadership on their own debt limit/shutdown legislation.
Still, analysts noted that stock markets were quite orderly despite the risks involved in the U.S. hitting its debt limit.
“Given the potential devastating effects on the financial markets, stocks took it quite well, believing this is still politics as usual,” said Ian Nakamoto, director of research at 3MACS Inc.
“I still believe they will come with a deal.”
While equity markets remained steady amid the negotiations, there were tremors on bond markets.
On Tuesday, the U.S. Treasury Department’s three-month and six-month bills sold at a higher-than average yield.
The US$35-billion of three-month bills sold at a high rate of 0.13 per cent, well above the 0.035 per cent paid to sell the notes a week ago. The Treasury sold $30-billion in six-month bills at a high rate of 0.15 per cent, compared to 0.06 per cent in last week’s sale.
Commodities were generally lower after optimism over reaching a U.S. debt deal sent prices higher for copper, oil and gold on Monday.
The gold sector led advancers, up about 3.1 per cent even as December bullion declined $3.40 to US$1,273.20 an ounce. Barrick Gold Corp. (TSX:ABX) was ahead 65 cents to C$18.46 while Goldcorp (TSX:G) climbed 49 cents to $24.97.
The base metals sector was up 1.49 per cent with December copper unchanged at US$3.31 a pound. Teck Resources (TSX:TCK.B) climbed 73 cents to C$27.89.
The tech sector was up 1.12 per cent as Wi-LAN Inc. (TSX:WIN) announced patent settlement deals with U.S. tech companies Hewlett-Packard Co. and Novatel Wireless Inc. The deals end litigation with both. Financial terms were not disclosed. Wi-Lan shares gained 13 cents to $4.25.
BlackBerry (TSX:BB) rose 15 cents to $8.50 as it appealed to customers to stay with the troubled smartphone maker while it restructures. In an open letter released Monday afternoon on Twitter and Facebook, and in some newspapers Tuesday, BlackBerry tells its “customers, partners and fans” that they can continue to count on the company.
The financials sector was also higher with National Bank (TSX:NA) ahead 54 cents to $86.36.
The Sunday Times reported that TD Bank is considering buying the Royal Bank of Scotland’s U.S. retail business Citizens for US$13-billion. TD Bank and RBS both declined comment on the report and TD (TSX:TD) shares fell 19 cents to $92.32.
The energy sector was slightly higher as the November crude contract on the New York Mercantile Exchange was off $1.20 at US$101.88 a barrel, its lowest close since July 2. Canadian Natural Resources (TSX:CNQ) gained 44 cents to C$33.74.
The industrials sector was down slightly as the Teamsters union warned of a potential strike or lockout at Canadian National Railways (TSX:CNR) starting on Oct. 28. The union represents some 3,300 conductors, trainmen, yardmen and traffic co-ordinators at CN. CN shares fell 42 cents to $109.07.
In earnings news, chip giant Intel posted quarterly earnings per share of 58 cents after the close. That was five cents better than analyst estimates. Its stock was up 2.2 per cent in after-hours trading in New York.