BUSINESS

Higher commodities boost TSX, geopolitical worries send crude oil surging

07/19/2012 08:27 EDT | Updated 09/18/2012 05:12 EDT
TORONTO - Resource stocks helped give the Toronto stock market a solid lift Thursday as commodity prices picked up on hopes that central bankers are ready to help with stimulus in the future.

Oil in particular got a lift from rising tensions in the Mideast, pushing prices past the US$92 level.

The S&P/TSX composite index ran up 86.54 points to 11,665.7 while the TSX Venture Exchange added 8.54 points to 1,190.87.

The Canadian dollar was up 0.29 of a cent to 99.23 cents US.

U.S. markets came off session highs after data showed sales of existing homes in June fell by 5.4 per cent to a seasonally adjusted annual rate of 4.37 million, much lower than the 4.65 million that was expected.

"Existing home sales brought to a fairly abrupt end to a run of good news regarding the U.S. housing market," observed CIBC senior economist Andrew Grantham.

"The large decline is at odds with the more positive recent trend in pending home sales, and took the rate of existing home sales down to its lowest so far this year."

As well, data showed manufacturing activity in the Philadelphia region rebounded only slightly in July. The Federal Reserve Bank of Philadelphia's diffusion index rose to negative 12.9 in July from negative 16.6 in June. This is the third straight monthly reading below zero, indicating contraction.

The Dow Jones industrials gained 34.66 points to 12,943.36.

The Nasdaq composite index was ahead 23.3 points to 2,965.9 while the S&P 500 index rose 3.73 points to 1,376.51.

Strong earnings news supported New York indexes.

IBM had reported after the close Wednesday that quarterly earnings rose six per cent to mark the 38th consecutive quarter that IBM’s net income has climbed from the previous year. Without accounting charges for past acquisitions and the company’s pension, IBM said it would have earned $3.51 per share, beating expectations by eight cents a share. IBM stock ran ahead $7.09 to US$195.34.

Morgan Stanley was a disappointment. Net income rose to $564 million or 29 cents a share, missing expectations by three cents. Revenue tumbled 24 per cent to $7 billion and its stock was down 74 cents to $13.25.

Microsoft was in focus as the software giant handed in its first-ever quarterly loss after the close because of an accounting adjustment to reflect a weak online ad business. The charge led to a US$492 million loss in the April-June quarter, or six cents a share. Excluding extraordinary items, the company reported a profit of 73 cents a share, higher than the 62 cents analysts expected. Its shares were up 1.58 per cent in after-hours trading.

In Canadian earnings news, Nexen Inc.’s (TSX:NXY) net income fell 57 per cent from a year ago to $109 million in the second quarter, a bigger decline than analysts had been estimating. Nexen earned 20 cents per share, which was seven cents per share below estimates. Nexen said the latest quarter’s results were hurt by the unsuccessful Kakuna exploration well in the Gulf of Mexico and its stock added a penny to C$17.44.

Shoppers Drug Mart (TSX:SC) reported second-quarter adjusted earnings of $149 million or 71 cents per share, up 4.4 per cent from the same time last year and a penny ahead of estimates. Its shares improved by 41 cents to $43.07.

Traders were focused on Fed Chairman Ben Bernanke during his two-day testimony to Congress. And while he did not indicate that another round of stimulus was imminent, his comments led investors to believe further action remained an option. The Fed has already completed two programs of asset purchases, which have the effect of increasing the supply of money, much of which ends up in financial markets.

The base metals sector climbed 4.42 per cent while copper, viewed as an economic bellwether as it is used in so many industries, ran ahead six cents to US$3.53 a pound. The rise reflected hopes that Chinese authorities will also take steps to improve that country's performance as the most recent data showed Chinese growth coming in at a three-year low of 7.6 per cent in the second quarter. Thompson Creek Metals (TSX:TCM) was 26 cents higher to $2.89 while First Quantum Minerals (TSX:FM) ran up $1.68 to $18.28.

Oil traded at seven month highs amid rising tensions in the Middle East. The oil market is concerned once again that Iran will try to block oil shipments through the Strait of Hormuz, a narrow waterway in the Persian Gulf through, through which one-fifth of the world’s oil travels every day. On Wednesday Israel blamed Iran for an attack on Israelis in Bulgaria, and vowed to strike back.

The August crude contract on the New York Mercantile Exchange up $2.79 to US$92.66 a barrel. The energy sector was up 1.61 per cent and Suncor Energy (TSX:SU) climbed 39 cents to C$30.59 and Canadian Natural Resources (TSX:CNQ) advanced 91 cents to $28.98.

The gold sector advanced 0.77 per cent as bullion prices also rose, up $9.60 to US$1,580.40 an ounce. Goldcorp Inc. (TSX:G) was up 74 cents to C$33.60.

The strong IBM results boosted the tech sector by 1.23 per cent. Open Text (TSX:OTC) gained 74 cents to $48.90 while CGI Group (TSX:GIB.A) was ahead 34 cents to $24.33.

Financials also supported the TSX and Manulife Financial (TSX:MFC) ran up 14 cents to $10.86.

The telecom sector was the weakest group with Telus Corp. (TSX:T) down 58 cents to $62.11.