A trader works on the floor of the New York Stock Exchange Nov. 5.Brendan McDermid/Reuters
Canadian stocks retreated on Thursday as Valeant Pharmaceuticals International Inc. declined to a two-year low and Magna International Inc. tumbled the most since 2011 on weaker quarterly sales.
Valeant sank 14.7 per cent for a third day of losses, to a November 2013 low. The drugmaker has now lost 69 per cent from an Aug. 5 high amid pressure over how it prices its drugs. Magna, the largest North American auto-parts supplier, tumbled as much as 15 per cent as sales slumped 7 per cent in the third quarter, missing analysts' estimates.
The Canadian benchmark equity gauge dropped 0.75 per cent or 103.04 to 13,558.78 in Toronto. The index climbed 1.7 per cent in October, the most since April. It was nevertheless the worst performance among 24 developed-nation markets in that time, as a gauge of global equities capped its best month in four years.
Valeant, briefly the largest stock in the S&P/TSX by market capitalization earlier this year, plunged a record 49 per cent in October after short-seller Citron Research accused Valeant of an Enron-like strategy of recording fake sales using an affiliated pharmacy. Valeant denied the allegation.
Valeant and Turing Pharmaceuticals AG are the focus of two probes in Congress seeking to examine why the companies raised the prices of medications sharply after acquiring them. Jana Partners Wednesday disclosed it had sold its stake in Valeant due to concerns about the company's changing business model.
In an interview published late Wednesday, investor Bill Ackman, one of Valeant's top shareholders, recounted for the Wall Street Journal how he has pressed the drugmaker's executives for answers and has told the company's lead director that Chief Executive Officer Mike Pearson may need to leave.
Magna International tumbled 10.25 per cent after blaming weakness in the euro and Canadian dollar against the U.S. dollar for the "significant negative impact" on sales. Foreign currency translation reduced revenue by about $870-million compared with year-ago figures, Magna said.
Smaller peer Linamar Corp. also tumbled 7.5 per cent after TD Securities analyst Brian Morrison lowered his rating for the stock to a hold.
Magna is among more than 40 companies in the S&P/TSX reporting quarterly earnings today. Penn West Petroleum Ltd. dropped 8.7 per cent as revenue slumped. The company suspended its dividend and cut its workforce by about a third during the quarter. Paramount Resources Ltd. plunged the most in 15 years, falling 20.3 per cent, after reporting a third-quarter loss late Wednesday.
First Quantum Minerals Ltd. slumped 6.8 per cent as copper for December delivery fell 2.97 per cent in New York. Factory orders in Germany, the third-biggest copper user, unexpectedly dropped for a third month, data showed Thursday. Copper has sunk 20 per cent this year as slowing Chinese growth cut demand.
Hydro One Ltd., Ontario's largest electricity transmission and distribution company, jumped 2.2 per cent in its trading debut. The Ontario government raised $1.66-billion from the initial public offering, at a price of $20.50 a share. The stock trades under the "H" ticker on the Toronto Stock Exchange.
U.S. stocks closed little changed near a three-month high as the specter of an interest rate increase this year left investors looking to Friday's jobs report for fresh signs the economy is strong enough to withstand tightening.
Equities swung between gains and losses in the session as a rally in banks helped erase declines sparked by a renewed selloff in Valeant. Weakness in commodity producers also held back stocks for a second day.
The Standard & Poor's 500 Index slipped 0.1 per cent to 2,100.13 in New York, after earlier falling as much as 0.6 per cent. The Dow Jones industrial average fell 3.21 points, or 0.02 per cent, while the Nasdaq Composite dropped 14.74 points, or 0.29 per cent, to 5,127.74.
"The only thing that's certain today is that there are going to be significant price swings in both directions," said Michael James, managing director of equity trading at Wedbush Securities Inc. in Los Angeles. "If the implications from the jobs report tomorrow do imply a December rate hike, it could weigh on the market. The Valeant debacle continues to weigh on health-care."
A rally in equities stalled after reaching a three-month high on Tuesday, after the S&P 500 gained as much as 13 per cent from an August low, carry the benchmark to within 1 per cent of its record. Gains in the past two months had been paced by a rebound in commodity shares, after they led declines during a summer selloff sparked by worries that weakness in China's economy would spread.
Stocks are coming off their strongest month in four years, bolstered as central banks in Europe and China pledged more stimulus and the Federal Reserve refrained from boosting interest rates in October. Traders now price in a 56-per-cent chance the Fed will increase rates at next month's meeting, up from 50 per cent earlier this week, after Fed Chair Janet Yellen said Wednesday the economy is performing well enough to possibly raise rates in December.
Fed Bank of New York President William Dudley backed Yellen's stance that December is a "live possibility," while Fed Vice Chairman Stanley Fischer expressed confidence that inflation isn't too far below the central bank's goal. Fed Bank of Atlanta President Dennis Lockhart is among central bank officials speaking today.
Friday's report on payrolls and unemployment will garner even more scrutiny as it feeds into the Fed's assessment of the economy's strength. A report today showed the number of Americans filing for unemployment benefits rose more than economists forecast to a five-week high, representing a pause in the recent progress that left claims at their lowest level since 1973.
Mixed earnings reports provided little direction for equities today. With more than 80 per cent of S&P 500 companies having reported, about 74 per cent have beaten earnings estimates, while only 45 per cent have topped sales forecasts. Analysts estimate profits dropped 3.9 per cent in the third quarter, up from predictions for a 6.1-per-cent decline a week ago.