The Toronto stock market headed higher Friday after the Federal Reserve removed a great degree of uncertainty over its stimulus plans while data showed the U.S. economy is performing much better than expected during the third quarter.
Traders also focused on BlackBerry (TSX:BB)(Nasdaq:BBRY) after the struggling smartphone maker handed in quarterly earnings that were worse than expected.
The S&P/TSX composite index ran ahead 105.25 points to 13,497.45.
BlackBerry posted a loss of US$4.4 billion or $8.37 a share, down from a profit of $9 million or two cents a share a year ago.
Poor sales of its new BlackBerry 10 devices sent revenue tumbling 56 per cent from a year ago to US$1.2 billion, which was $400 million lower than expected. Adjusted losses from continuing operations were US$354 million, or 67 cents per share, 23 cents below analyst estimates.
Despite the weak financial report, BlackBerry shares were up sharply at late morning, jumping $1.05 or 15.74 per cent to C$7.72 on the TSX and ahead 99 cents or 15.84 to US$7.24 in New York.
The stock rally was likely fuel by a five-year manufacturing partnership with Foxconn, optimistic comments from new chairman John Chen and short covering, as traders who bet against the stock — or shorted the security — had to buy back the borrowed shares. The stock is still down from a 52-week high in Toronto of $18.49.
The Canadian dollar declined 0.14 of a cent at 93.62 cents US as the greenback advanced after the U.S. Commerce Department said that the economy grew at a solid 4.1 per cent annual rate from July through September, the fastest pace since late 2011 and significantly higher than previously believed. Much of the upward revision came from stronger consumer spending.
The final look at growth in the summer was up from a previous estimate of 3.6 per cent.
“It’s a very substantial revision,” said Bob Gorman, chief portfolio strategist at TD Waterhouse.
And the key is that economic data is revised constantly but all the data is pointing in the same direction at this stage and . . .it points to the pickup in economic growth that we felt was coming.
U.S. indexes also found lift from the Fed announcement Wednesday where it ended months of speculation and announced it will start to end its latest asset-purchase program.
The Dow Jones industrials were up 75.62 points to 16,254.7, the Nasdaq gained 36.22 points to 4,094.36 and the S&P 500 index was ahead 9.66 points to 1,819.26.
Policymakers have decided to cut $10 billion from the Fed’s monthly purchases of U.S. Treasuries and mortgage-backed securities starting in January. It also said it “will likely reduce the pace of asset purchases in further measured steps at future meetings.”
The Fed also emphasized that its main interest rate would remain low until U.S. unemployment falls below 6.5 per cent. It’s now seven per cent.
The base metals segment led advancers, up 1.7 per cent while March copper gained two cents to US$3.31 a pound and the base metals component also rose 0.5 per cent. Teck Resources (TSX:TCK.B) climbed 51 cents to $26.17.
Rail stocks rose alongside miners with Canadian National Railways (TSX:CNR) ahead 63 cents to $60.79.
The telecom sector rose 0.87 per cent with Telus (TSX:T) ahead 40 cents to $36.64.
The energy sector was up 0.7 per cent as February crude on the Nymex gained seven cents to US$99.11 a barrel. Canadian Natural Resources (TSX:CNQ) was up 47 cents to C$35.49.
The financials group was also ahead 0.7 per cent with Manulife Financial (TSX:MFC) ahead 23 cents to $20.98 and Sun Life Financial (TSX:SLF) rose 36 cents to $37.33.
Manulife and other insurers have benefitted from bond yields that have headed higher in recent months as markets started to speculate that the Fed was getting ready to taper its asset purchases.
“The life insurers are natural beneficiaries of (Fed tapering) in that they all suffered as bond yields went down a lot,” said Gorman.
“But they are a beneficiary as bond yields move up. And for the coming year, our favourties have been the banks, I think going forward you want to diversify a little more, have some insurance names.”
The TSX gold sector was up slightly while gold prices ticked slightly higher after plunging over $40 on Thursday to three-year lows. The February contract on the New York Mercantile Exchange rose $8.80 to US$1,202.40 an ounce.
Quantitative easing had supported gold prices because of inflationary fears. But inflation is tame in many countries and data out earlier this week showed the consumer price index rising at an annual rate of only 1.2 per cent, significantly below the Fed’s inflation target of two per cent.
Gold prices are down 29 per cent so far this year while the TSX Global Gold sector has tumbled about 50 per cent.