The Toronto stock market was slightly higher at midday Tuesday amid concerns about whether a U.S. stock rally may be running out of steam and indications of slower than anticipated economic growth prospects.
The S&P/TSX composite index ticked 13.87 points higher to 13,471.93, as the Canadian dollar fell 0.26 of a cent to 95.6 cents US.
The Organization for Economic Cooperation and Development cut its 2014 forecast for global growth from four per cent to 3.6 per cent. The OECD cited U.S. fiscal uncertainty, the impact of the Federal Reserve tapering its asset purchases and weakness in emerging markets.
U.S. markets were little changed after indexes backed off Monday after hitting key technical levels, raising questions about whether American markets are due for their first serious retracement in two years.
The Dow Jones industrials gained 7.77 points to 15,983.79, the Nasdaq rose 0.68 of a point to 3,949.74 and the S&P 500 index slipped 0.11 of a point to 1,791.42.
Investors remained cautious a day after the Dow broke 16,000 and the S&P breached the 1,800 mark — both for the first time. The Dow alone has surged more than 20 per cent this year and is up about 900 points since early October amid optimism that the Federal Reserve won’t be moving to cut back on its monthly US$85 billion of bond purchases until well into the new year.
“You always have to be cautious when the market has gone up as fast as it has,” said Ian Nakamoto, director of research at 3MACS.
“(But) any correction that could happen I would use it to buy the dips because valuations are still reasonable.”
The TSX is up about 8.5 per cent for the year so far, dragged down by the mining sector. Most other sectors have put in a solid performance, particularly financials, energy companies and industrials — companies Nakamoto thinks will likely take the TSX higher.
“Much more of the direction of the TSX is going to be the financial and energy components because we have had such a correction in the mining sectors,” he observed.
The gold sector was up 0.66 per cent while December bullion climbed $1.40 to US$1,273.70 an ounce. The sector has been a major drag this year, plunging about 45 per cent this year as global inflation remains very low while economic conditions are gradually improving, making bullion less attractive as a hedge. Goldcorp (TSX:G) advanced 28 cents to C$25.48.
The energy sector advanced 0.5 per cent as December crude on the Nymex inched up five cents to US$93.08 a barrel. Canadian Natural Resources (TSX:CNQ) gained 31 cents to C$33.94.
The consumer sector was in focus Tuesday as Sears Canada Inc. (TSX:SCC) stock jumped $1.10 or 6.55 per cent to $17.90 as the retailer said that it will pay its shareholders an extraordinary dividend of $5 per share. Sears also posted a quarterly net loss of $48.8 million or 48 cents per share, mainly due to severance and restructuring costs.
Food company George Weston (TSX:WN) posted earnings ex-items of $1.38 a share, seven cents shy of estimates. Its shares declined 18 cents to $81.27 as the company also said overall sales rose 2.1 per cent to $10.38 billion.
The base metals sector was flat as December copper edged up two cents to US$3.16 a pound. First Quantum Minerals (TSX:FM) fell 18 cents to $18.67.
In other corporate news, Patheon Inc. (TSX:PTI) has received a friendly takeover offer that values the drug company at about US$1.4 billion, which is more than 50 per cent above its recent market price. The offer of US$9.32 per share cash is coming from a group backed by Patheon’s largest shareholder, U.S. private equity firm JLL Partners. Patheon shares surged $3.68 or 62 per cent to $9.62.
In the U.S., Home Depot Inc. reported net income of US$1.35 billion, or 95 cents per share, up from $947 million, or 63 cents per share, a year ago. Analysts expected earnings of 89 cents per share. Revenue rose seven per cent to $19.47 billion from $18.13 billion. Wall Street predicted $19.18 billion. Its shares gained $1.45 to $81.12.
Electronics retailer Best Buy Co. returned to a profit in the third quarter as the busy holiday season revs up. However, the company says it expects a tough competitive environment during the holiday season and its shares fell $3.60 or 8.26 per cent to $39.96.
Traders are looking to the release Wednesday of the minutes from the latest Fed meeting held late last month for hints about when the central bank might start cutting back on its asset purchases, which have kept bond yields low and encouraged people to buy equities.