TMX Broadcast Centre in downtown Toronto Oct. 22, 2013Fernando Morales/The Globe and Mail
The Toronto stock market traded relatively flat on Thursday morning as the latest figures on the domestic economy showed there could be further challenges ahead.
The S&P/TSX composite index rose 41.06 points to 14,780.26 at mid-morning.
The Canadian dollar rose 0.47 of a cent to 78.88 cents (U.S.), coming off a decline that saw the currency briefly drop to an six-year low on Wednesday.
New data from Statistics Canada says the ratio of household debt to disposable income hit a fresh high in the fourth quarter as incomes increased at a slower pace than consumer borrowing. The agency says households owed about $1.63 for every dollar of disposable income.
On the commodity markets, the April crude contract is down 55 cents to $47.62(U.S.) a barrel on the New York Mercantile Exchange, while April bullion contracts lifted $2.10 at $1,152.70 (U.S.) an ounce. March copper contracts are up 4.9 cents at $2.66 (U.S.) a pound.
In the U.S., the Dow Jones industrials ran up 201.53 points, to 17,836.81, the Nasdaq climbed 30.53 points to 4,880.47 while the S&P 500 index edged up 20.53 points to 2,060.77.
On Wall Street, banking stocks among the biggest gainers of the day, though tech shares were pressured by a weak outlook from Intel.
All 10 primary S&P 500 sectors were higher on the day, representing a partial rebound off a recent bout of weakness, which took the S&P 500 down in eight of the past 11 sessions, and off 3 per cent over the past four sessions alone.
The S&P 500 is still on track for its third consecutive weekly decline as the prospect of higher U.S. interest rates and the strength of the dollar seen as a headwind for corporate earnings. A much stronger-than-expected payrolls report last Friday cemented views of a hike coming sooner than previously expected.
"I've been a believer in a June rate hike for a while, but the odds really went up on Friday, and the market action we've seen since then is in line with the volatility we've historically seen around rate hikes," said James Liu, global market strategist for JPMorgan Funds in Chicago.
The Fed's policy-setting committee meets next week.
"I think we're finally seeing some early signs of fatigue in the dollar's rally," said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington, D.C.
"Caution is on the rise ahead of next week's Fed meeting. On the one hand, steady job growth has many expecting the Fed to lay the groundwork for an eventual rate hike. But this rapid rise in the dollar could warrant a warning from the Fed as a potential threat to growth," he said.
The outlook for Canada's economy paled in an RBC Economics report released Thursday, as the bank downgraded its latest economic forecast for 2015 after a sharp drop in energy prices.
The bank projects Canada's real GDP to grow by 2.4 per cent this year — a reduction of 0.3 percentage points from its forecast issued last December. RBC says while the drop in energy prices is a negative for the oil and gas sector, much of the weakening will be offset by stronger consumer spending and exports.
In corporate news, Transat AT Inc. says it's aiming for $100-million of cost savings and margin improvements by 2017, including $45-million in 2015. Its net loss in the first quarter of 2015 was $64.3-million, up from $25.6-million. After excluding the impact of fuel-price hedging contracts, its adjusted net loss was $32.4-million, up from $23.3-million. Transat's shares were down 67 cents at $6.03.
Shares in Penn West Petroleum Ltd. gained 13 cents to trade fro $2.06 after it responded to the drop in oil prices with another cut to its dividend, which will drop to one cent per share for the first-quarter payment on April 15. The company said in December that the first-quarter dividend would be three cents per share, which was down from 14 cents per share for the fourth quarter. The company had a $1.77-billion loss in the fourth quarter as well as a 24 per cent decline in revenue from a year earlier amid falling oil prices.
With files from Reuters