A TSX tote board is pictured in Toronto.Frank Gunn/The Canadian Press
Canadian stocks were little changed, after reaching a two-week high, as financial companies offset commodity producers amid speculation higher U.S. interest-rate increase could occur sooner than expected.
The benchmark S&P/TSX Composite Index added 0.1 percent to 13,934.65 at 10:15 a.m. in Toronto. Volume today in the benchmark was 68 percent higher than the 30-day average at this time of the day. The gauge now trades at 21.1 times earnings, about 12 percent higher than the 18.9 times valuation of the S&P 500, data compiled by Bloomberg show.
First Quantum Minerals Ltd. and Teck Resources Ltd. dropped at least 4 percent to lead raw-materials producers 1 percent lower. Goldcorp Inc. declined 1.5 percent. Cenovus Energy Inc. and ARC Resources Ltd. lost more than 1.1 percent as energy producers fell.
Copper sank to a three-month low and gold retreated for the first time in four days as the dollar climbed to a seven-week high. Atlanta Federal Reserve President Dennis Lockhart and San Francisco's John Williams said Tuesday two interest-rate rises may be warranted this year, while Dallas Fed President Robert Kaplan said a move could come soon.
Traders are now pricing in a 16 percent chance of a Federal Reserve interest-rate hike in June, up from 4 percent on Monday. The Fed is scheduled to release minutes from its latest meeting at 2 p.m. in Washington. Economic data Tuesday on housing starts and the cost of living topped forecasts, renewing speculation for higher borrowing costs.
Energy and raw-materials industries account for about 32 percent of the broader benchmark by market capitalization and have led gains this year, with the materials group surging 42 percent for its best year-to-date performance in three decades. That's helped the S&P/TSX post one of the best performances this year among developed economies, behind only New Zealand out of 24 markets.
Financial shares helped offset losses in resource producers, rising 0.3 percent amid higher bond yields. Royal Bank of Canada added 0.5 percent.
Valeant Pharmaceuticals International Inc. fell 1.7 percent after a three-day gain. The embattled drugmaker is said to be exploring the sale of some of its smaller cosmetic and pharmaceutical assets to raise cash and reduce debt, according to people familiar with the matter. The stock has slumped almost 90 percent from an August peak amid scrutiny over its business practices.
U.S. markets
U.S. stocks advanced as banks rallied to overshadow losses among consumer companies, while investors awaited Federal Reserve meeting minutes amid speculation borrowing costs could rise as soon as next month.
Banks in the S&P 500 surged the most in a month amid the prospect for higher interest rates as Treasury yields rose to a two-week high. Retailers remained under pressure as Target Corp. had its steepest drop since 2008 after reporting quarterly sales that missed analysts' predictions. Wal-Mart Stores Inc. lost 2.7 percent, dragging down consumer staples shares after the group yesterday saw the biggest one-day slide in eight months.
The S&P 500 rose 0.3 percent to 2,053.84 at 11:53 a.m. in New York, after erasing a 0.4 percent drop. The Dow Jones Industrial Average added 32.84 points, or 0.2 percent to 17,562.82. The Nasdaq Composite Index rose 0.7 percent, buoyed by gains in Apple Inc. and Qualcomm Inc.
"The market's just a little bit on edge and there's not a lot of conviction," said Robert Pavlik, who helps oversee $9.1 billion as chief market strategist at Boston Private Wealth. "We're seeing some rotation out of the more defensive areas like staples, and I think that relates to yesterday's inflation concern coming in hotter than expected. That's leading people to bring the Federal Reserve back on the table for the June meeting."
Stocks yesterday erased Monday's rally after data on housing starts and the cost of living topped forecasts, and two Fed presidents said at least two rate raises may be warranted this year. That spurred concerns borrowing costs could rise sooner than expected even as global growth languishes.
Goldman Sachs Group Inc. downgraded equities to neutral, saying they don't look attractive unless companies post sustained earnings growth. The S&P 500 has fallen for three straight weeks, the longest stretch since January, after a 15 percent rally from a 22-month low in February lost traction amid a tepid earnings season and lukewarm economic data. The benchmark has slipped 2.3 percent from a four-month high reached on April 20, and is less than 4 percent from a record set a year ago.
Ahead of Fed minutes due at 2 p.m. in Washington, traders are pricing in a 16 percent chance of higher borrowing costs in June, up from 4 percent on Monday, while wagers for a July move jumped to 33 percent from 16 percent last week. September is now the first month with at least even odds of higher rates after such bets had been pushed out to February as recently as a week ago.
As the earnings season draws to a close, Cisco Systems Inc. and Urban Outfitters Inc. are among those releasing results today. Of the S&P 500 firms that have already done so, 75 percent beat profit estimates, while 54 percent surpassed sales predictions. Analysts have moderated forecasts for a first-quarter profit decline to 7.4 percent, from 10 percent in April.
"Investors will be looking carefully at the minutes to see if they need to rethink their outlooks," said Hugh Grieves, who runs the 145 million-pound ($210 million) U.S. Opportunities Fund at Miton Group in London. "Yesterday's data plus recent commentary from some of the Fed governors have shaken investors' confidence that they are positioned correctly. The next few months could see a return to the volatility that we saw at the start of the year if markets and the Fed's inflation expectations prove to be mismatched."
In Wednesday's trading, five of the S&P 500's 10 main industries retreated, with consumer staples and discretionary companies losing at least 0.3 percent. Financial shares jumped 1.6 percent, while technology added 0.8 percent. Energy, industrials and utilities were little changed.
Fifth Third Bancorp and Citizens Financial Group Inc. jumped at least 4.2 percent to lead gains among banks in the equity benchmark. Bank of America Corp. and JPMorgan Chase & Co. added more than 3.2 percent amid speculation higher rates will bolster profits. In the broader financial group, Lincoln National Corp. rose 4.1 percent to a four-month high, while Charles Schwab Corp. and E*Trade Financial Corp. each increased at least 4.3 percent.
Apple rose 1.5 percent, on the way toward snapping its longest weekly losing streak in 11 months. Chief Executive Tim Cook began his first visit to India Wednesday as the iPhone maker and its competitors are keen to expand in a country with the prospect of a billion new device sales. Qualcomm added 2.2 percent, headed to a two-month high.
Consumer staples dropped for a second day as Hormel Foods Corp. tumbled 8.1 percent, the most on a closing basis since 2008 after narrowing margins sparked concern about the maker of Spam and other supermarket fare. Wal-Mart was on track for its biggest back-to-back slide since October, and Costco Wholesale Corp. fell 2.5 percent on the way to its fifth decline in six days.