01/20/2012 08:21 EST | Updated 03/21/2012 05:12 EDT

Bank stocks send TSX higher as commodity prices fall, GE, Google disappoint

TORONTO - The Toronto stock market closed slightly higher amid lower commodity prices and a mixed run of earnings news from the United States.

The S&P/TSX composite index gained 16.41 points to 12,397.1 as the market balanced lower energy and mining stocks with higher gold and financials, while the TSX Venture Exchange gained 17.13 points to 1,571.34.

The Canadian dollar was lower as new data showed a much lower inflation reading in December.

The loonie was down 0.17 of a cent to 98.7 cents US after inflation fell sharply last month, down 0.6 per cent from November to an annualized rate of just 2.3 per cent.

"Soggy consumer confidence clearly prompted some heavy-duty price cuts in discretionary goods," said BMO Capital Markets deputy chief economist Doug Porter.

"The bottom line is quite straightforward — this year’s holiday shopping season saw incredibly intense discounting, and almost across the board."

U.S. markets were mainly higher with the Dow industrials ahead 96.5 points to 12,720.48. The Nasdaq was down 1.63 points to 2,786.7 and the S&P 500 index added 0.88 of a point to 1,315.38.

Industrial conglomerate General Electric said Friday that its fourth-quarter earnings fell 18 per cent to US$3.73 billion. Excluding discontinued businesses and certain pension costs, earnings were 39 cents a share, a penny better than estimates. But revenue came in at $37.97 billion, below Wall Street’s US$40.05 billion estimate and shares were unchanged at US$19.15.

Search engine Google was also a disappointment as revenue totalled $10.6 billion, up from $8.4 billion in the previous year. It’s the first time Google’s quarterly revenue topped $10 billion, but even that figure fell shy of analyst projections and its shares fell 8.4 per cent.

And IBM Corp.'s fourth-quarter earnings handily beat Wall Street’s expectations on Thursday, coming in at US$5.49 billion, helped by higher revenue and profit margins in the technology icon’s lucrative software and services segments. Its shares gained almost 4.5 per cent even as the company missed on revenue expectations.

"A lot of topline misses have had to do with the U.S. dollar appreciating," said Luciano Orengo, portfolio manager at Manulife Asset Management.

"This market seems to be dismissing slightly negative news and sort of moving forward but companies that have missed by a wide margin like Goggle are getting hit."

The financials sector was the lead advancer, up almost one per cent as Manulife Financial (TSX:MFC) gained 32 cents to $12.65 and TD Bank (TSX:TD) climbed 93 cents to $79.15.

The gold sector was also supportive as the February gold contract on the Nymex shed early losses to gain $9.50 to US$1,664 an ounce. Goldcorp Inc. (TSX:G) climbed 73 cents to $45.62 while Iamgold (TSX:IMG) was ahead 10 cents to $15.82.

The base metals sector was the leading TSX decliner, down 1.9 per cent as metal prices also backed away with March copper down five cents to US$3.75 a pound. But prices for the metal, viewed as an economic bellwether because it is used in so many businesses, have gained about three per cent this week after Chinese growth for the fourth quarter came in better than expected. China is the world's biggest consumer of copper.

But countering that data Friday morning was HSBC’s Flash China Manufacturing Purchasing Managers Index reading for January came in at 48.8.

That is up slightly on the final reading from December of 48.7 but a reading below 50 still signals contraction.

"I think what people are seeing with copper is that Chinese stocks have been coming off quite a bit and the ratio of inventory to consumption is below two weeks," added Orengo.

"The consensus view is that coming out of the Chinese New Year holiday, (starting this weekend), Chinese will have to restock on copper because they are dangerously low at the moment."

First Quantum Minerals (TSX:FM) dropped $1.35 to $22.55 while HudBay Minerals (TSX:HBM) gave back 19 cents to C$11.29.

Meanwhile, oil prices continued to lose ground as signs of economic improvement in the U.S. and Europe were tempered by a rise in gasoline stocks, which suggests weaker demand for crude.

The energy sector was down 0.22 per cent as the February crude contract on the New York Mercantile Exchange dropped $1.93 to US$98.46 a barrel. Canadian Natural Resources (TSX:CNQ) lost 34 cents to C$38.98.

Connacher Oil and Gas Ltd. (TSX:CLL) said it has hired U.S. investment banker Goldman Sachs to review its business plan and help explore strategic options. Its shares rose two cents to $1.08.

Traders also kept an eye on debt-reduction talks between Greece and its private creditors that could determine whether Europe's debt crisis flares up again.

Prime Minister Lucas Papademos met for a third day with negotiators from the Institute of International Finance, which represents the private creditors who are being asked to take a loss on their bondholdings to lighten Greece’s debt load by €100 billion.

An agreement is needed if Greece is to get the next batch of bailout cash that would prevent a devastating debt default — Greece does not have enough money to cover a €14.5 billion bond repayment in March.

The TSX was up for a third week amid signs of improving economic conditions in the U.S. and generally positive earnings, up 166 points or 1.35 per cent.

The Dow industrials rose 298 points or 2.4 per cent.