The Toronto stock market racked up a solid advance Monday amid rising metal prices, while traders looked to the kickoff of the second-quarter earnings season in the U.S. with results from resource giant Alcoa Inc.
The S&P/TSX composite index advanced 73.96 points to 12,208.87.
The Canadian dollar closed up 0.07 of a cent to 94.7 cents US amid data showing surprising strength in the Canadian housing sector in May. Statistics Canada reported that building permits worth $7.3-billion were issued in May, up 4.5 per cent from April. Economists had expected a drop of around 10 per cent.
U.S. indexes ran ahead, building on strong gains from the end of last week after job creation figures from June blew past expectations.
The Dow Jones industrials gained 88.85 points to 15,224.69, the Nasdaq was ahead 5.45 points at 3,484.83 and the S&P 500 index advanced 8.57 points to 1,640.46.
After the close, Alcoa posted quarterly earnings and revenue that beat expectations. The aluminum giant earned seven cents a share, a penny better than forecast. Revenue came in at $5.85-billion, surpassing expectations of $5.8-billion and its stock was 1.4 per cent higher in after-hours trading.
Despite the results, Alcoa had a tough quarter as its debt rating was downgraded to junk by Moody’s Investors Service on May 29, cutting the rating by one notch to Ba1 from Baa3 with a stable outlook. Moody’s cited weaker aluminum demand on slower growth in China and a recession in Europe for the move. Alcoa stock had closed up 11 cents to $7.92, a long ways from its 52-week high of $9.93.
Banks JPMorgan and Wells Fargo are also among companies that will report earnings this week.
Analysts predict that earnings growth for U.S. companies in the Standard & Poor’s 500 index rose three per cent in the second quarter. While growth is down from five per cent in the first quarter, earnings are expected to remain close to record levels.
Canadian corporations haven’t done nearly as well. Earnings for companies came in at $74-billion for the first quarter, down 1.2 per cent from the previous quarter with resource companies in particular hit by rising costs and lower commodity prices.
On the TSX, railway stocks were lower amid questions about the transport of crude oil in the wake of a derailment over the weekend in Lac-Megantic, Que. At least five people are dead while about 40 people are still missing.
“The multiple is exponential, the amount of oil that is now being shipped by rail versus just even five years ago (and) it’s been very accretive to earnings,” said Paul Vaillancourt, managing director at Fiera Capital in Calgary.
“It’s very tragic but at the end of the day we don’t think that the railway stocks are going to get crushed on this. One could argue that pipelines could offer a safer alternative and that’s maybe the viewpoint that a lot of people (have) in Calgary here.”
Canadian National Railway was down 73 cents to $102.73 and Canadian Pacific was off 52 cents to $126.69. Meanwhile, stock in pipeline company TransCanada gained 82 cents to $46.41.
TSX advancers were led by a rise of almost three per cent in the utilities sector. The group, like other interest sensitive sectors including pipelines and telecoms, have been under selling pressure since late May when U.S. Federal Reserve chairman Ben Bernanke suggested that the central bank could taper its program of bond purchases. His remarks had the effect of pushing bond yields higher. The benchmark U.S. 10-year Treasury stood at 2.65 per cent late Monday afternoon, up about a full percentage point from May.
“Any of the interest-sensitive sectors that have been beat up are rallying a bit this morning,” Vaillancourt said.
Just Energy Group improved by 30 cents to $6.45 while Canadian Utilities climbed $1.57 to $37.42.
Oil prices were little changed after unrest in Egypt helped push the price of crude up seven per cent last week. The August crude contract on the New York Mercantile Exchange dipped eight cents to $103.14 a barrel. But the energy sector climbed just shy of one per cent and Suncor Energy gained 47 cents to C$31.60.
Financials also provided lift with the sector ahead 0.75 per cent. Manulife Financial gained 59 cents to $17.89 after earlier hitting a new 52-week high of $17.94.
Mining stocks, which lead TSX sector declines for the year so far, fared poorly with the base metals sector down 0.13 per cent while copper prices edged up three cents to $3.10 a pound after sliding 11 cents on Friday. Turquoise Hill Resources rose 43 cents to $6.20 while Teck Resources fell 37 cents to $21.18.
The gold sector was down 1.5 per cent even as bullion prices headed higher amid a sign that the recent steep price drop may be coming to an end. The August bullion contract on the Nymex rose $22.20 to $1,234.90 an ounce after strategists at Deutsche Bank said much of gold’s correction may have already happened.
Prices have been particularly under pressure since the Fed indicated it could scale back bond purchases and data showed an improving U.S. economy and tame inflationary pressures. Gold now is down more than 30 per cent from a peak of around $1,900 an ounce in September 2011.
Goldcorp Inc. faded 55 cents to $24.91 and Kinross Gold dropped 13 cents to $4.85.