TSX, traders shake off durable goods disappointment, maintain hopes for stimulus

08/24/2012 08:15 EDT | Updated 10/24/2012 05:12 EDT
TORONTO - The Toronto stock market closed slightly higher Friday as traders shrugged off a weak U.S. manufacturing report and hopes rose for another dose of economic stimulus from the U.S. Federal Reserve.

The S&P/TSX composite index gained 19.72 points to 12,082.23, while the TSX Venture Exchange added 3.80 points to 1,251.88.

The Canadian dollar was ahead 0.21 of a cent at 100.85 cents US.

U.S. markets also advanced after the U.S. Commerce Department said that orders for durable goods rose a seasonally-adjusted 4.2 per cent in July. But there had been initial dismay as the data showed that excluding aircraft and other transportation goods, orders dropped 0.4 per cent. Economists had expected a 2.5 per cent rise.

"Is it really realistic to exclude the whole aircraft and auto industry from the numbers?" asked Robert Gorman, chief portfolio strategist at TD Waterhouse. "No."

"The auto sector numbers continue to be quite strong, they’re a big part of the economy and I wouldn’t get too bent out of shape about the ex-transport number being below expectations. I’m not sure this is really going to make a huge difference at the end of the day and the ... market reaction reflects that."

Sentiment improved on markets late in the morning after the Wall Street Journal reported that Federal Reserve Chairman Ben Bernanke made it clear in a letter to a House Republican lawmaker that he thinks the Fed can do more to bolster the economic recovery and help reduce unemployment.

Bernanke says in the letter to Darrell Issa that with interest rates already at record lows, the Fed has had to deploy other means to strengthen the economy, such as buying bonds.

The Dow Jones industrial average jumped 100.51 points to 13,157.97.

The Nasdaq composite index was 16.39 points higher to 3,069.79 while the S&P 500 index rose 9.05 points to 1,411.13.

The Fed has been in focus after minutes released Wednesday from the Federal Reserve’s last policy meeting showed bankers favoured more stimulus.

But doubts about Fed intentions grew Thursday after St. Louis Federal Reserve Bank president James Bullard said the minutes from the Aug. 1 meeting were stale because the economy had picked up since then.

Adding to uncertainty was Chicago Fed president Charles Evans, who said Thursday the Fed should take action to bolster the economy.

The durable goods report added to the debate over whether the U.S. economic recovery has weakened to a point where the Federal Reserve will launch another round of stimulus measures.

Commodities were lower and the energy sector led advances, up 0.41 per cent as the October crude contract on the New York Mercantile Exchange slipped 12 cents to US$96.15 a barrel. Petrominerales Ltd. (TSX:PMG) was ahead 40 cents to $9.84 while Talisman Energy (TSX:TLM) improved 29 cents to $13.56.

The financials rose 0.35 per cent with Royal Bank (TSX:RY) ahead 44 cents to $53.73 and Manulife Financial (TSX:MFC) up 10 cents to $10.96.

The TSX base metals component led losers, down 0.91 per cent as copper eased a penny to US$3.48 a pound following a 12-cent jump over the last three sessions. Inmet Mining (TSX:IMN) gave back $1.32 to $45.16 while Sherritt International (TSX:S) lost 16 cents to $4.56.

Techs were weak as Research In Motion Ltd. (TSX:RIM) gave back 15 cents to $6.88.

The gold sector fell about 0.22 per cent while bullion added a dime to Thursday's US$32 rise, closing at US$1,672.90 an ounce. Iamgold Corp. (TSX:IMG) faded 14 cents to $12.98.

A three month rally on the TSX looked frayed by Friday with the main index down a slight 0.06 per cent for the week. But the TSX is up 6.6 per cent from the lows of early June.

Markets have been supported this month after European Central Bank president Mario Draghi pledged to do whatever was necessary to protect the euro currency by lowering borrowing costs for vulnerable members such as Spain. Traders had hoped this would be backed up by definitive measures at the ECB's next interest rate meeting Sept. 6.

But bank officials say that Draghi may wait until Germany’s Constitutional Court rules on the legality of Europe’s permanent bailout fund before announcing any new measures to buy government bonds.

The court is set to rule on Sept. 12.

Traders also digested a report from Reuters that the European Central Bank was considering yield targets in a bond-buying program. There were also fresh questions about how the European Central Bank plans to decisively deal with the eurozone debt crisis.

Also, the German Finance Ministry confirmed for the first time that a scenario involving a Greek exit from the eurozone "and accompanying contagion firewalls are being examined."

The news came as Greek Prime Minister Antonis Samaras visited Berlin for talks with German Chancellor Angela Merkel.

In corporate news, shares of Score Media Inc. (TSX:SCR) jumped nearly 46.67 per cent to $1.54 following reports that the specialty TV sports broadcaster was in discussions to be purchased by Rogers Communications (TSX:RCI.B).

China National Offshore Oil Co. raised the takeover price for Calgary-based oil and gas giant Nexen Inc. (TSX:NXY) twice before the $15.1-billion bid was ultimately accepted, according to an information circular sent to shareholders. Nexen shares dipped nine cents to $25.45.

Eli Lilly’s potential Alzheimer’s disease treatment failed to slow mental decline in two late-stage studies, but combined data from both trials showed promising results in patients with mild-to-moderate cases of the mind-robbing disease. Its shares were up 3.44 per cent to US$43.86.