The screens at the TMX Broadcast Centre in Toronto show the closing numbers of the TSX on Tuesday, July 3, 2012.Matthew Sherwood/The Globe and Mail
The Toronto stock market racked up a solid advance Tuesday morning, helped along by gold stocks which continued to recover from a severe battering earlier in the summer.
However, economic concerns pressured oil prices and traders awaited more clarity on what the Federal Reserve may decide to do about cutting back on a key stimulus measure.
The S&P/TSX composite index gained 75.46 points to 12,663.48, making up about half of Monday's 149-point slide.
The Canadian dollar was down 0.42 of a cent to 96.27 cents US.
New York indexes were modestly higher amid better than expected earnings from retailers Best Buy, Home Depot and J.C. Penney.
The Dow Jones industrials rose 33.73 points to 15,044.47, the Nasdaq gained 20.81 points to 3,609.89 while the S&P 500 index added 7.37 points to 1,653.43.
Traders looked ahead to Wednesday and the release of the minutes from the Fed's most recent meeting at the end of last month. A largely positive run of economic data has persuaded many investors that the central bank will start to taper its monthly bond purchases of $85-billion, starting as early as September. The stimulus program has kept long term rates low and encouraged a sharp runup on many markets this year.
"Clearly this whole debate about whether we see the onset of tapering in September has taken centre stage," said Garey Aitken, chief investment officer at Bissett Investment Management in Calgary, who also pointed out that seasonality is playing a part.
"We're in the summer doldrums, we're out of earnings season . . . so what is everybody focused on? You focus on what's in front of you. So it's probably got a bit more of a pronounced effect."
The TSX gold sector ran up about 3.2 per cent while gold ticked $9.30 higher to $1,375 an ounce. The sector was punished along with gold prices after Fed chairman Ben Bernanke first mentioned the possibility of the Fed cutting back in May. The sector hit a recent low in late June, leaving the gold sector down about 50 per cent year to date. It has since improved and the sector is down about 30 per cent so far in 2013.
"We've seen a kind of natural bounce back from probably overdone levels with the producers, we've seen a better gold price in the last five or six weeks," added Aitken.
"Those producers fell more than the price of gold had declined."
Goldcorp Inc. (TSX:G) gained 81 cents to $32.84.
The utilities sector also provided lift. Utilities and other interest sensitive stocks have been a major drag as the prospect of the Fed tapering its massive bond purchases has sent U.S. bond yields higher. The benchmark U.S. 10-year Treasury was off 0.04 of a point from late Monday at 2.84 per cent. Bond yields have surged well over a full percentage point since Fed chairman Ben Bernanke first mentioned the possibility of the Fed cutting back in May. Just Energy Group (TSX:JE) gained 23 cents to $6.39.
The energy sector was ahead 0.76 per cent while speculation over Fed intentions pushed the September crude contract on the New York Mercantile Exchange down 82 cents to $106.28 a barrel. Canadian Natural Resources (TSX:CNQ) gained 36 cents to $31.03.
The financials group ran up 0.7 per cent with Bank of Montreal (TSX:BMO) up 59 cents to $64.55.
The base metals sector was off 0.15 per cent while copper was unchanged at $3.33 a pound. Turquoise Hill Resources (TSX:TRQ) climbed 14 cents to $5.25 while Teck Resources (TSX:TCK.B) headed 57 cents lower to $27.53.
Elsewhere in the mining sector, BHP Billiton said its annual profit dived nearly 30 per cent to $10.9-billion as slower growth in China and other emerging economies resulted in lower prices for copper, coal and iron ore. Annual revenue sank nearly nine per cent to $66-billion.
Home Depot beat Wall Street expectations and raised its full-year earnings and revenue expectations. The company earned $1.8-billion, or $1.24 per share, while revenue climbed more than nine per cent to $22.52-billion. Analysts expected earnings of $1.21 per share on revenue of $21.79-billion. Its stock added four cents to $75.25.
J.C. Penney Co. stock rose six cents to $13.28 despite another big loss on a nearly 12 per cent drop in revenue for the second quarter. It lost $586-million, or $2.66 per share while revenue reached $2.66-billion. Analysts were expecting a $1.07-per-share loss on revenue of $2.77-billion.
Best Buy shares surged $2.97 to $33.70 as cost-cutting efforts and a benefit from legal settlements led to a quarterly profit of $266-million or 77 cents a share. The biggest specialty electronics store in the U.S. said earnings ex-items were 32 cents per share against the 12 cents that analysts had expected. Revenue fell slightly to $9.3-billion from $9.34-billion last year. Analyst expected $9.13-billion.
Fed concerns also pressured European bourses and London's FTSE 100 index lost 0.46 per cent, Frankfurt's DAX fell 0.85 per cent and the Paris CAC was down 1.5 per cent.