BUSINESS

TSX closes flat, U.S. fourth-quarter economic growth misses expectations

01/27/2012 08:27 EST | Updated 03/28/2012 05:12 EDT
TORONTO - The Toronto stock market closed little changed Friday as investors were relieved to see the U.S. economy expanding at a greater pace in the fourth quarter — but disappointed that the growth was slower than expected.

The S&P/TSX composite index gained 2.18 points to 12,466.5, led by higher gold stocks, while traders also took in another slew of eurozone downgrades.

TSX Venture Exchange rose 14.14 points to 1,628.92.

The U.S. Commerce Department reported that fourth-quarter gross domestic product rose to an annualized rate of 2.8 per cent, better than the 1.8 per cent pace chalked up in the third quarter. However, the reading was less than the three per cent gain that economists had expected.

"Without sugar-coating it, this was a disappointing report," said TD Bank senior economist James Maple.

"After three quarters of sub-two per cent growth and heading into another difficult year, we had really been looking for something that would signal renewed momentum in the U.S. economy. Growth of 2.8 per cent does not meet that standard."

The Canadian dollar closed off session highs following the release of the data, up 0.1 of a cent at 99.93 cents US after going as high as 100.14 cents US.

U.S. markets were mainly lower following the data as investors also took in an earnings report from automaker Ford that missed expectations.

New York's Dow Jones industrial average fell 74.17 points to 12,660.46. The Nasdaq composite index gained 11.27 points to 2,816.55 and the S&P 500 index was down 2.11 points to 1,316.32.

Ford made US$13.4 billion in the fourth quarter, largely due to an accounting change. Without the gain, Ford earned $1.1 billion, or 20 cents per share, missing expectations by five cents. Its quarterly revenue rose six per cent to $34.6 billion and its shares fell 46 cents to US$12.28.

Markets seemed unfazed when U.S. ratings agency Fitch announced it was downgrading the credit of five countries that use the euro, including economic heavyweights Italy and Spain.

Fitch said the downgraded countries, which also include Belgium, Cyprus and Slovenia, faced financial and economic headwinds from the eurozone’s debt crisis that could diminish their ability to sustain their own debt loads.

The downgrade was largely expected, as Fitch had said it was reviewing the country’s ratings. It comes on top of a downgrade of nine eurozone countries by another ratings agency, Standard & Poor’s, on Jan. 13.

The TSX gold sector was ahead almost two per cent as bullion prices advanced for a third day, up $5.50 to US$1,732.20 an ounce. Iamgold (TSX:IMG) climbed 33 cents to C$17.07 while Barrick Gold Corp. (TSX:ABX) ran up 47 cents to $49.46.

The tech sector also gave support and Research In Motion (TSX:RIM) shares gained 51 cents to $16.97 after Fairfax Financial Holdings (TSX:FFH) reported it had doubled its stake in the BlackBerry maker.

A filing with the U.S. Securities and Exchange Commission shows Fairfax raised its stake to 5.12 per cent of the company after Fairfax head Prem Watsa joined RIM's board Jan. 22, the same day RIM shook up its management roles with its co-CEOs being replaced. Fairfax shares fell $7.14 to $410.51.

Financials were the major decliner on the TSX, down 0.72 per cent with Bank of Nova Scotia (TSX:BNS) down 42 cents at $52.31 and Royal Bank (TSX:RY) shedding 39 cents to $52.33.

Oil prices weakened following the release of the GDP report, with the March contract on the New York Mercantile Exchange slipping 14 cents to US$99.56 a barrel. The energy sector was slightly lower, with Canadian Oil Sands (TSX:COS) closing down 13 cents at $24.82.

The March copper contract on the Nymex slipped one cent to US$3.89 and the base metals sector was down 0.54 per cent. HudBay Minerals (TSX:HBM) gained 12 cents to C$11.94 and Ivanhoe Mines (TSX:IVN) shed 31 cents to $17.05.

Ivanhoe Mines deputy chairman Peter Meredith said Friday that he expects the company’s board to continue to have a majority of independent directors. Rio Tinto, which recently increased its stake in the company to 51 per cent, has said it expects to seek a majority on the board.

Attention was also focused on the resumption of talks to reach a deal on how Greece can avoid a catastrophic default on its debt. Greece and its bailout rescuers — other countries that use the euro and the International Monetary Fund — are asking private creditors to swap their Greek bonds for new ones with a lower value and interest rate.

The two sides have so far disagreed over what interest rate the new bonds should take. Some negotiators have said they hope to have a deal this weekend, in time for a European leaders’ meeting on Monday.

And The Wall Street Journal reported that Facebook could file regulatory papers for its initial public offering of stock as early as next week.

Facebook’s expected launch as a publicly traded company is the most hotly anticipated tech IPO in more than a decade and sources think the social network company could raise as much as US$10 billion.