The Toronto stock market was flat Monday amid major acquisition activity and a revenue and profit warning from athletic wear retailer Lululemon Athletica.
The S&P/TSX composite index dipped 1.4 points to 13,746.12, pressured by declines in the gold sector.
The Canadian dollar was higher after five straight losing sessions, up 0.17 of a cent to 91.9 cents (U.S.). The loonie declined well over two U.S. cents last week amid disappointing trade data and a jobs report at the end of the week showing that the economy shed 46,000 jobs last month. The dollar has also been buffeted lately by the central bank’s dovish stance on interest rates.
U.S. indexes were lower as investors continued to digest Friday’s American government employment showing that only 74,000 jobs were created during December. That missed estimates for at least 200,000 jobs and raised speculation about how quickly the Federal Reserve may move to end its key stimulus program, its massive monthly bond purchases.
The Dow Jones industrials dropped 21.26 points to 16,415.79, the Nasdaq was down 5.64 points to 4,169.02 and the S&P 500 index drifted 1.76 points lower to 1,840.61.
Shares of Lululemon Athletica plunged 14.7 per cent to $50.85 (U.S.) in New York after the Vancouver-based company said fourth-quarter revenue and profit will be significantly lower than its previous estimate. Lululemon’s new revenue range is between $513-million and $518-million, about $22-million lower than the previous guidance, saying sales were on track through December but have have been significantly below target this month.
The company’s new estimate for diluted earnings per share is between 71 and 73 cents per share, a reduction of seven cents.
Goldcorp Inc. is making a $2.6-billion takeover play for Montreal-based Osisko Mining Corp. Goldcorp is offering a combination of stock and cash that values Osisko at $5.95 (Canadian) per share, about 15 per cent above the stock’s value at the end of last week. Osisko hasn’t said whether its board supports the takeover offer, which is being made directly to Osisko shareholders.
Goldcorp. is one of the Canada’s largest gold producers and says the acquisition of Osisko would provide it with a major mine in Quebec and other assets with growth potential. Goldcorp shares lost 71 cents to $24.58 while Osisko jumped 19 per cent to $6.15.
And in the U.S., Beam, the maker of Jim Beam and Marker’s Mark alcohol brands, has agreed to be acquired by Japan’s Suntory Holdings Ltd. for approximately $13.62-billion. Suntory will pay $83.50 per share, a 25 per cent premium to Beam’s Friday closing price of $66.97. The companies put the deal’s value at about $16-billion, including debt.
Suntory has a portfolio of spirits, with whiskies including Yamazaki and Hakushu as well as Midori liqueur and other beverages.
Meanwhile, the fourth quarter earnings reporting season starts to heat up this week with reports from major financial institutions including JPMorgan Chase, Wells Fargo and Bank of America along with market bellwethers including General Electric and chip giant Intel.
This earnings season follows a strong 2013 where the S&P 500 rocketed about 30 per cent, helped in large measure by Fed stimulus. Now investors want to see if strong earnings and revenue can justify that gain and push stock prices higher.
“The way to think about the market is the level of earnings and the multiple which should be applied to that earnings growth,” David Kostin, chief U.S. equity strategist at Goldman Sachs Group Inc., said on Bloomberg Television.
“Those really are the fundamental drivers of the level of U.S. equity markets this year. Earnings growth is likely to be the principal source of return for U.S. investors because, historically speaking, the market is trading at a pretty elevated level.”
The gold sector was the leading TSX decliner, down 0.65 per cent February bullion edged 90 cents lower to $1,246 (U.S.) an ounce. Barrick Gold faded 37 cents to $19.45 (Canadian).
Industrials also gave up ground as Canadian Pacific Railway declined $2.23 to $164.84.
The base metals sector was ahead 0.35 per cent while March copper dipped two cents to $3.32 (U.S.) a pound. Capstone Mining gained three cents to $2.99 (Canadian).
The energy sector was slightly higher while February crude on the New York Mercantile Exchange was down 60 cents to $92.12 (U.S.) a barrel.
European bourses were positive as London’s FTSE 100 index and Frankfurt’s DAX gained 0.12 per cent and the Paris CAC 40 added 0.21 per cent.