Gold miners would face an erosion of equity value if the price of gold falls below $1,100 an ounce, one analyst says.Carla Gottgens/Bloomberg
The Toronto stock market closed higher Tuesday as traders bought up gold stocks that have come under severe selling pressure recently and digested a mixed bag of earnings reports.
The S&P/TSX composite index climbed 50.47 points to 14,760.27.
It is a relatively quiet session with government offices, banks and Treasury markets closed for Remembrance Day in Canada and Veterans Day in the United States. On international markets, the Canadian dollar ticked 0.35 of a cent higher to 88.27 cents (U.S.) late in the afternoon.
U.S. indexes were little changed with the Dow Jones industrials up 1.16 points to 17,614.9 while the Nasdaq gained 8.94 points to 4,660.56 and the S&P 500 index rose 1.42 points to 2,039.68 .
The gold sector led advancers, up about four per cent after falling six per cent on Monday. The December gold contract on the New York Mercantile Exchange erased early losses to close up $3.20 at $1,163 an ounce.
But bullion prices have fallen steadily amid an end to the Federal Reserve's massive bond buying stimulus program, a steady flow of positive American economic data and a rising U.S. dollar. The TSX gold sector has plunged about 15 per cent in the last month alone as bullion's rapid drop in price has made it less economical for producers to extract the metal and analysts don't see a revival any time soon.
"That can continue to be the short-term reaction here," said Stephen Lingard, managing director, Franklin Templeton Solutions.
"You might expect to see continuing softness in commodities with a strengthening U.S. dollar (and as) the Fed exits from quantitative easing."
The energy sector gained 0.7 per cent as the December crude oil contract erased early losses and gained 54 cents to $77.94 a barrel. Oil has plunged from $105 in the summer because of rising supplies and the higher American currency.
December copper was ahead one cent at $3.03 a pound, pushing the mining sector up one per cent.
In corporate news, Rona Inc. gained 19 cents to $13.85 (Canadian) as the home improvement retailer reported adjusted quarterly profit of $38.5-million or 33 cents, a penny shy of estimates.
Revenue for the national home-improvement chain was $1.167-billion, mostly stable compared with $1.169-billion a year before despite the closure of underperforming stores. Same-store sales at locations open at least a year rose two per cent in Rona's retail segment and 8.3 per cent in its distribution segment.
Engineering company WSP Global Inc. had $29.1-million of net income before adjustments in the third quarter, a 36 per cent increase over the comparable period last year. Revenue was $630.7-million, up 28.6 from a year earlier and its shares ticked $1.72 higher to $36.
Shares in auto parts maker Martinrea International Inc. plunged 17.7 per cent to $10.14 as quarterly net earnings were $19.4-million or 23 cents per share, down from $20.9-million or 25 cents a year ago. Revenue rose to a record $859.5-million from $767.9-million. Canaccord Genuity downgraded the stock to hold from buy and analyst David Tyerman also cut his price target on the stock to $11 from $17, noting that Martinrea's third-quarter earnings came in below analyst estimates.
Aecon Group Inc. shares tumbled 12.1 per cent to $12.65 as quarterly net profits were $39.5-million or 49 cents per diluted share, up from $34.4-million or 53 cents in the same 2013 quarter. But revenue contracted to $840.4-million from $897.3-million and the construction company warned its margins could be squeezed next year if soft conditions in the resource sector continue.