TSX lower on U.S. growth, consumer data; BMO earns boost financial sector
Published Tuesday November 24th, 2009
TORONTO - The Toronto stock market was negative Tuesday afternoon with buyers discouraged by data showing weaker than expected U.S. economic growth and tepid consumer sentiment just before the start of the holiday shopping season.
Toronto's S&P/TSX composite index dropped 50.2 points to 11,573.8 after the U.S. Commerce Department reported the economy grew at an annual rate of 2.8 per cent in the third quarter, compared with a previous government estimate of 3.5 per cent.
The new reading was weaker than the 2.9 per cent revised growth rate economists had expected.
"It's the U.S. government doing everything and the consumer doing nothing," observed John Stephenson, portfolio manager at First Asset Funds..
"If you look at the growth in the last quarter, (government stimulus) had a lot to do with it. We don't have a solution to replace that except more stimulus so there's really no exit strategy other than the government continues to print money."
The Canadian dollar was down 0.29 of a cent to 94.42 cents US.
The financial sector was the leading advancer, up 0.4 per cent after the Bank of Montreal (TSX:BMO) reported its fourth-quarter net income rose 16 per cent from year-ago levels to $647 million. Earnings per share were $1.11, easily beating analyst estimates of 98 cents, compared with $1.06 a year earlier.
Total revenue in the quarter increased by 6.3 per cent to $176 million while its provision for credit losses decreased to $386 million during the quarter, down $79 million from last year. Its shares moved up 39 cents to $53.94.
"Well, I would say BMO has just done a stellar job. It was a great quarter, there is no way to say anything negative about it," said Stephenson, adding the results bode well for earnings reports from the rest of the sector.
Elsewhere on the Canadian earnings front, George Weston Ltd. (TSX:WN) said Tuesday that its profit dropped 52 per cent to $86 million or 56 cents a share in the most recent quarter, down from $180 million or $1.29 a share a year ago. Results at North America's largest baker were hurt by foreign exchange charges.
Revenue at the company, which holds a controlling interest in supermarket chain Loblaw Companies, slipped one per cent to $9.78 billion and its shares ticked 59 cents higher to $59.69.
The TSX energy sector was off 0.12 per cent as the January crude contract on the New York Mercantile Exchange declined $1.63 to US$75.93 a barrel. Canadian Natural Resources (TSX:CNQ) climbed 87 cents to $71.86.
Mining stocks were also negative.
The gold sector was down 1.13 per cent even as the December bullion contract on the Nymex gained $1.10 to a record high close of US$1,165.80 an ounce. Goldcorp Inc. (TSX:G) faded 97 cents to $45.88.
The base metals sector stepped back 1.27 per cent with December copper off one cent to US$3.12 a pound. Teck Resources (TSX:TCK.B) moved back 96 cents to C$36.40.
The TSX Venture Exchange moved 2.36 points lower to 1,414.27.
New York markets were also negative in the wake of the economic data with the Dow Jones industrials down 46.4 points to 10,404.5.
The Nasdaq composite index was off 14.81 points to 2,161.2 while the S&P 500 index declined four points to 1,102.25 after the U.S. Conference Board said that its Consumer Confidence Index edged up to 49.5 from a revised reading of 48.7 in October. Economists surveyed by Thomson Reuters had expected a reading of 47.7.
One component of the Conference Board's confidence gauge that measures consumers' assessment of the current economy fell slightly to 21.0, compared with 21.1 in October.
Consumer spending accounts for more than two-thirds of all U.S. economic activity and a rebound in shopping is considered vital for a strong recovery.
Other data out Tuesday morning showed that U.S. home prices rose slightly in September, the fourth straight monthly increase.
Investors have been battling mixed signals on the economy in recent months. Areas like housing have shown modest improvements, but others like consumer confidence and employment are lagging. That has investors worried that their bets on an economic recovery over the past eight months may have been overdone. The main Toronto index is up about 50 per cent while the Standard & Poor's 500 index is up 63.5 per cent since early March.
In other corporate news, Manulife Financial Corp. (TSX:MFC) is expanding its Chinese operations with a deal to buy Fortis Bank's 49 per cent interest in China-based ABN AMRO TEDA Fund Management Co. for 105 million euros, or US$156 million. Its shares declined 21 cents to $18.57.
Kingsway Financial Services Inc. (TSX:KFS) shares fell 13 cents or 7.69 per cent to $1.56 after it said credit ratings agency A.M. Best has downgraded its issuer credit rating to Triple-C from Single-B. The financial strength ratings of several other insurers in which Kingsway has a major interest were also downgraded.
Shares in Alimentation Couche-Tard Inc. (TSX: ATD.B), which operates convenience stores throughout Canada and the United States, gained 65 cents to $20.75 after it said says its latest quarterly profit was down nearly 10 per cent from a year earlier. But revenue was up 5.3 per cent.
Western Coal Corp. (TSX:WTN) shares declined three cents to $2.72 after it said Monday a proposed class action lawsuit has been filed in Ontario Superior Court alleging inaccurate disclosure in company's second-quarter financial report in 2007.
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