The Wal-Mart Supercentre in Toronto’s Dufferin Mall is seen in this file photo.Della Rollins/The Globe and Mail
The Toronto stock market gave up a solid early gain and slipped marginally into the red Wednesday as an impending deadline for dealing with the U.S. budget and debt ceiling continued to cast a shadow over trading.
The S&P/TSX composite index had been up as much as 65 points, but by mid-afternoon the main index had dipped 0.25 of a point to 12,848.65, reflecting growing weakness in telecoms and industrials.
The Canadian dollar also erased early gains and was down 0.02 of a cent at 97.05 cents US.
U.S. indexes largely moved deeper into negative numbers amid reports that Wal-Mart Stores Inc. (NYSE:WMT) was cutting orders from suppliers this quarter and next to address rising inventories. The retailer later responded that the reports were "misleading." Wal-Mart stock was down $1 to $74.75 (U.S.) after falling as low as $73.56.
Meanwhile, investors looked ahead to an Oct. 1 deadline for American political leaders. At issue is a temporary spending bill required to keep the U.S. government fully open after the start of the new budget year.
The government reaches its borrowing limit, or debt ceiling, early in October. If Congress doesn't raise that limit, the government won't be able to pay all its bills, a blow to confidence in the world's biggest economy.
Treasury Secretary Jacob Lew says the government will have exhausted its borrowing authority by Oct. 17, leaving the United States with just $30-billion cash on hand to pay its bills.
The Dow Jones industrials fell 58.69 points to 15,275.9, the Nasdaq was 4.27 points lower at 3,763.98 and the S&P 500 index was down 1.83 points to 1,695.59.
Investors well remember the last time Democrats and Republicans locked horns over raising the debt limit during the summer of 2011. Indexes were hard hit as traders worried about a possible default and the damage done to the economy from a possible government shutdown. Standard & Poor's ended up downgrading the U.S. credit rating, before a political compromise was reached.
"Last time, I was amazed," said Chris King, portfolio manager at Morgan, Meighen and Associates.
"It backed companies off, it backed consumers off, it was a real suppressant to the economy and it could be similar this time."
On the economic front, U.S. durable goods orders in August were up 0.1 per cent following a 7.4 per cent drop in July. Other data showed that U.S. new home sales rebounded by 7.9 per cent in August to 421,000, the biggest one-month gain since January.
Telecoms and industrials led the TSX lower with Telus Corp. (TSX:T) down 90 cents to $34.66 while Canadian National Railways (TSX:CNR) fell $1.68 to $102.42.
The information technology sector was also lower as BlackBerry shares continued to deteriorate as the Globe and Mail reported that Fairfax Financial Holdings Ltd. (TSX:FFH) is seeking more than $1-billion (U.S.) from other investors to help fund a takeover of BlackBerry Ltd. (TSX:BB). Fairfax said on Monday that it's leading a group that would buy the Canadian smartphone maker for $4.7-billion, paying shareholders $9 (U.S.) a share.
The Globe said that as of Tuesday only one pension fund is seriously considering joining the Fairfax-led consortium – the Ontario Teachers Pension Plan. BlackBerry fell 45 cents to $8.33.
The TSX gold sector led advancers, up about 3.2 per cent while December bullion gained $19.90 to $1,336.20 an ounce. Goldcorp Inc. (TSX:G) rose 77 cents to $27.16.
December copper was ahead two cents to $3.27 a pound and the base metals sector was up 1.5 per cent with Teck Resources (TSX:TCK.B) ahead 53 cents to $28.73.
The energy sector was up 0.5 per cent while oil prices moved lower as data showed that U.S. supplies increased by 2.6 million barrels last week, against a drop of 1.5 million barrels that analysts expected. The November contract on the New York Mercantile Exchange dropped 55 cents to $102.58 a barrel. Suncor Energy (TSX:SU) advanced 56 cents to $37.19.
In earnings news, AGF Management Ltd. (TSX:AGF.B) earned 11 cents per share from continuing operations in the wealth management company's third quarter, or $10.1-million. That was two cents per share below analyst estimates and was flat compared with adjusted diluted earnings of 11 cents per share a year earlier, after excluding one-time charges. AGF gained 26 cents to $12.64.