BUSINESS
03/01/2012 08:33 EST | Updated 05/01/2012 05:12 EDT

Solid bank earnings, higher commodities support Toronto stock market

TORONTO - The Toronto stock market registered a solid advance Thursday as the financial sector ran ahead amid strong financial results and dividend hikes from two of the big banks.

The TSX was also lifted by commodity stocks as positive economic data lifted prices for oil and metals.

The S&P/TSX composite index was ahead 79.45 points to 12,723.46 and the TSX Venture Exchange was up 16.90 points to 1,688.43.

The Canadian dollar rose 0.37 of a cent to 101.43 cents US.

TD Bank (TSX:TD) boosted its dividend nearly six per cent to 72 cents while posting lower net income from a year ago. The bank's first-quarter net income dropped five per cent to $1.48 billion, or $1.55 per share. But its shares rose $$1.17 to $82 as the bank surpassed analyst expectations as adjusted earnings came in at $1.7 billion, up from $1.6 billion a year ago.

Royal Bank of Canada (TSX:RY) is raising its dividend six per cent to 57 cents a share amid a sharp drop in profits that were affected partly by dramatically lower earnings in its capital markets division. Its net income fell five per cent to $1.86 billion, or $1.21 per share.

The results beat analyst expectations on a cash diluted basis of $1.25 per share, compared to consensus expectations of $1.13 and its shares gained $1.12 to $56.80.

Lower net profits aren’t a big surprise since investors have been aware that the current environment of very low interest rates and a slowing economy mean tight margins and slower loan growth.

At the same time, raising dividends sends a strong message.

"(It’s) a pretty strong signal about their view that they can sustain increased earnings over the course of this next year, even though the environment is not a great one for the banks," said Robert Gorman, chief portfolio strategist at TD Waterhouse.

Positive American economic data also encouraged traders. The U.S. Commerce Department said consumer spending increased 0.2 per cent in January. That's better than December's reading of no change.

Americans' income rose 0.3 per cent, the second straight monthly increase.

Also, the number of people seeking unemployment benefits fell slightly last week to the lowest point in four years, a further sign that the U.S. job market is steadily improving. A seasonally adjusted 351,000 people sought unemployment aid, down from 353,000 the previous week.

New York's Dow Jones industrial average finished the session well off session highs amid a late day spike in oil prices past US$110 a barrel amid a report of pipeline fire in Saudi Arabia. Saudi officials later denied those reports.

The blue chip index gained 28.23 points to 12,980.3.

The Nasdaq composite index rose 22.08 points to 2,988.97 and the S&P 500 index advanced 8.41 points to 1,374.09.

The energy sector was up 0.77 per cent as the April contract on the New York Mercantile Exchange rose $1.77 to US$108.84 a barrel.

Cenovus Energy (TSX:CVE) gained 49 cents to C$38.95 and Canadian Natural Resources (TSX:CNQ) was ahead 68 cents to $37.41.

The TSX base metals sector gained 1.09 per cent as commodity prices advanced following additional good news on China's economy, with the May copper contract was up five cents to US$3.93 a pound.

China's manufacturing sector gained momentum in February, helped by strength in new orders, export demand and production. The state-affiliated China Federation of Logistics and Purchasing said its purchasing managers index, or PMI, rose 0.5 points to 51.0 from January's 50.5 and December's figure of 50.3 in a third straight month of steady improvement.

Signs of an improving U.S. economy and hopes that China will loosen lending requirements to encourage growth boosted copper prices about 2.5 per cent in February. China is the world's biggest consumer of copper, viewed as an economic bellwether as it is used in so many businesses.

Ivanhoe Mines (TSX:IVN) climbed 94 cents to C$18.11 while First Quantum Minerals (TSX:FM) advanced 79 cents to $23.43.

The gold sector gained 0.62 per cent as bullion prices stabilized after tumbling almost US$80 on Wednesday as the latest U.S. economic data and comments by U.S. Federal Reserve chairman Ben Bernanke sent a signal that the central bank won't be embarking on another round of quantitative easing, which has involved printing money in order to buy government bonds.

Gold prices have benefited from past rounds of QE and speculation over further measures because of the inflation implications of such stimulus measures.

The April bullion contract on the Nymex gained $10.90 to US$1,722.20 an ounce. Goldcorp Inc. (TSX:G) climbed 94 cents to C$48.91 while Agnico Eagle Mines (TSX:AEM) gained 31 cents to $36.28.

The tech sector was down with shares in Research In Motion Ltd. (TSX:RIM) declining 68 cents or 4.85 per cent to $13.35 after Jefferies & Co. cut its earnings estimate and said there was a greater than 50 per cent chance that the BlackBerry maker will miss its device sales forecast for the fiscal fourth quarter, which ended in February.

Another drag on the TSX was Bombardier Inc. (TSX:BBD.B). The transportation giant posted net income of US$214 million or 12 cents per share for the fourth quarter, down from $295 million or 16 cents per share a year earlier. Quarterly revenues totalled $4.3 billion, compared to $5.6 billion in the previous year. Its shares fell 45 cents or 9.47 per cent to $4.30.