Sliding mining stocks helped push the Toronto stock market lower Wednesday while traders looked to a release of information that could signal what the U.S. Federal Reserve plans to do about winding up a key economic stimulus program.
The S&P/TSX composite index lost 73.49 points to 12,596.62 with weakness spread across all sectors save for a slight rise in consumer staples.
The Canadian dollar also headed lower, down 0.51 of a cent to 95.75 cents US as the U.S. greenback strengthened and traders looked to the mid-afternoon release of the minutes of the latest Fed meeting late last month.
Many analysts think the Fed judges the economy is strong enough to start to let up on its monthly purchase of $85-billion in bonds, a program which has kept rates low and helped stimulate investment.
But there is nervousness surrounding the tapering of these purchases since the latest bond-buying program, known as quantitative easing, has also fuelled a strong rally on the U.S. equity markets this year.
“I think the reality is the Fed has assisted in the growth, I think it’s been well-telegraphed that they intend to withdraw stimulus at some point,” said John Stephenson, portfolio manager at First Asset Funds Inc.
“But I think that stimulus being withdrawn should have been factored into the market by now. It’s actually surprising.”
He thinks much of the downward pressure on U.S. markets recently is due to the fact that that indexes “have come pretty far and maybe it’s time to lighten up.”
New York markets were weak ahead of the release of the Fed minutes at 2 p.m. (ET).
The Dow Jones industrials dropped 51.65 points to 14,951.34, the Nasdaq was 1.88 points lower to 3,611.71 and the S&P 500 index was down 4.82 points to 1,647.53.
Analysts believe the Fed could start tapering its asset purchases as early as September.
Strong housing data out Wednesday bolstered that point of view as the National Association of Realtors said that sales of existing U.S. houses ran ahead 6.5 per cent during July, much higher than the 0.4 per cent rise that economists had expected. That translated into sales at an annual rate of 5.39 million.
The base metals sector led TSX declines, down 1.7 per cent and September copper slipped three cents to $3.30 a pound. Teck Resources (TSX:TCK.B) lost 68 cents to $26.90.
Turquoise Hill Resources Ltd. is reported to be conditionally in favour of accepting a Chinese coal company’s offer for its majority stake in Inova Resources Ltd. (TSX:IVA), an Australian mining company listed in Toronto and Sydney. Inova says Shanxi Donghui Coal Coking & Chemicals Group Co., Ltd. is offering 22 cents Aus per Inova share and Vancouver-based Turquoise Hill (TSX:TRQ) has agreed to tender it shares, unless a better offer comes forward. Turquoise Hill rose nine cents to $5.39. Inova hasn’t traded since Aug. 2, when it closed at 16 cents.
The gold sector was down 0.8 per cent while December bullion lost $5.20 to $1,367.40 an ounce. Goldcorp Inc. (TSX:G) faded 37 cents to $32.52.
The industrials group was also a weight, down almost one per cent as transport giant Bombardier Inc. (TSX:BBD.B) gave back 11 cents to $4.58.
The energy sector was slightly lower while the October crude contract on the New York Mercantile Exchange moved down 50 cents to $104.61 a barrel. Canadian Oil Sands (TSX:COS) fell 48 cents to $20.21.
Investors also considered earnings reports from the Canadian and U.S. retail sectors.
Sears Canada (TSX:SCC) posted net income of $152.8-million or $1.50 per share, including an after-tax gain of $164.0-million. Ex-items, Sears lost 11 cents per share. Second-quarter revenue was down 9.6 per cent from the same time last year. Its shares slipped 13 cents to $12.14.
Home improvement retailer Lowe’s said second-quarter net income rose 26 per cent to $941-million, or 88 cents per share. That’s up from $747-million, or 64 cents per share, a year ago. Revenue increased 10 per cent to $15.71-billion from $14.25-billion. Analysts surveyed by FactSet expected earnings of 79 cents per share on revenue of $15.07-billion and its shares ran up $2.55 to $46.63.
Target Corp. is reporting a 13 per cent drop in second-quarter earnings as the discounter spent money on opening stores in Canada and dealt with cautious shoppers in the U.S. Target earned $611-million, or 95 cents per share. Ex-items, the retailer earned $1.19 per share. Revenue reached $17.12-billion, up two per cent. Analysts were expecting earnings of 96 cents per share on revenue of $17.28-billion, according to FactSet and its shares fell $2.01 to $65.94.
Another big disappointment was Staples. Its stock plunged $2.17, or 12.9 per cent, to $14.66 after the office supplies chain reported earnings and sales that missed analysts’ expectations. The company also slashed its full-year profit forecast.
European bourses were mixed as London’s FTSE 100 index lost 0.61 per cent while Frankfurt’s DAX and the Paris CAC 40 edged up 0.02 per cent.