BUSINESS

Toronto stock market closes little changed as Fed keeps stimulus hopes alive

08/22/2012 08:16 EDT | Updated 10/22/2012 05:12 EDT
TORONTO - The Toronto stock market closed little changed Wednesday after minutes from the most recent Federal Reserve rate announcement encouraged hopes for further economic stimulus.

The TSX and New York indexes had been negative for most of the session as weak corporate performances and retail sales data reminded traders of the fragile state of the economic recovery.

The S&P/TSX composite index added 2.06 points to 12,118.99 and the TSX Venture Exchange climbed 6.34 points to 1,245.66.

The Canadian dollar fell 0.17 of a cent to 100.87 cents US amid a big miss on retail sales for June.

Statistics Canada reported that retail sales fell 0.4 per cent, against expectations of a 0.1 per cent rise.

New York markets also closed well off session lows after the Fed minutes showed many members felt further support for the economy would be needed "fairly soon" unless the economy improved significantly. The minutes didn’t say what steps might be taken. The boldest move would be to launch a new program of bond buying to try to lower long-term interest rates to encourage more borrowing and spending.

The Fed makes its next interest rate announcement Sept. 13. The central bank could also announce new stimulus measures at that time.

But analysts said the minutes should be read with caution since there has been a string of positive economic data since the last Fed meeting Aug. 1, including stronger than expected job creation in July, improving retail sales and consumer confidence, and rising applications for building permits.

The Dow Jones was down 30.82 points to 13,172.76. The Nasdaq gained 6.41 points to 3,073.67 and the S&P 500 index edged up 0.32 of a point to 1,413.49.

Traders also took in a report from the U.S. real estate industry that showed sales of previously- owned homes increased last month, but less than anticipated.

The U.S. National Association of Realtors said home resale volume rose to a seasonally-adjusted annual rate of 4.47 million in July, a 2.3 per cent increase from the previous month's rate.

That was slightly less than the 4.52 million that economists expected in July

"The housing market in the U.S., which is core to banking and core to the consumer in terms of the wealth side, continues to trickle ahead," said Chris King, portfolio manager at Morgan, Meighen and Associates.

"Not big leaps and big turnarounds (but) it is ticking along in the right direction."

Mining stocks were under pressure as sector giant BHP Billiton reported that its annual profit plunged 34.8 per cent from a year ago to US$15.4 billion as a slowdown in global economic growth led to weaker prices for its key commodities.

BHP's revenue for the year was up 0.7 per cent to $72.2 billion.

In addition, Chinese car maker Geely Automobile Holdings Ltd. said first-half profit was flat and trading conditions in the world’s biggest auto market in the second half of 2012 "are expected to be more challenging."

Adding to signs of a global slowdown in growth, Japan posted a $6.5-billion trade deficit in July, compared with a surplus the year before, as exports fell eight per cent. Exports of autos and electronics by Asia’s second-biggest economy have been hurt by the strengthening yen as well as weak demand from Europe.

The metals and mining sector was negative even as copper kept Tuesday's eight-cent runup intact with the September contract unchanged at US$3.45 a pound. Teck Resources (TSX:TCK.B) shed 17 cents to $29.75 while Sherritt International (TSX:S) gave back seven cents to $4.68.

The energy sector was off 0.53 per cent as the October crude price on the New York Mercantile Exchange found lift from the Fed minutes and data showing a sharper-than-expected decline in U.S. inventories last week, rising 15 cents to US$96.99 a barrel. Suncor Energy (TSX:SU) pulled back 46 cents to $31.73 and Canadian Natural Resources (TSX:CNQ) declined 31 cents to $31.46.

Financials were also weak as Scotiabank (TSX:BNS) eased 57 cents to $52.78.

The gold sector was the leading advancer as December bullion faded 70 cents to US$1,642.20 an ounce. Barrick Gold Corp. (TSX:ABX) rose 80 cents to $37.28 while Iamgold Inc. (TSX:IMG) rose 49 cents to $12.82.

In other corporate news, dozens of independent merchants who operate 164 Rona stores across Canada have written to the head of Lowe’s Companies (NYSE:LOW), saying they are opposed to a takeover of Quebec-based Rona Inc. (TSX:RON). The letter, made public Wednesday, says the independents prefer Rona’s approach of combining a network of independents with more than 200 corporate stores. Rona shares were down 67 cents to $12.45.

Shares in Dell Inc. slumped 5.35 per cent to US$11.68 as the computer maker earned $732 million, or 42 cents per share, an 18 per cent decline from last year as the growing popularity of smartphones and tablets undercut sales of computers.

In a sign of further weakness ahead, Dell lowered its earnings target by 20 per cent for its fiscal year ending in January. Dell trimmed its full-year guidance, even though its adjusted earnings for the just-completed quarter topped analyst projections.