News Column

Stocks to rise as Fed cuts stimulus, traders take in earnings, await U.S. data

January 30, 2014

By Malcolm Morrison TORONTO _ The Toronto stock market appeared set to advance Thursday while traders dealt with another slate of earnings news and digested the U.S. Federal Reserve's latest move to cut back stimulus measures. The Canadian dollar was up 0.03 of a cent to 89.45 cents US. U.S. futures were higher after chalking up big losses Wednesday after the Fed said that it was cutting its bond purchases by another US$10 billion to $65 billion a month. It was the central bank's second such move to cut back on the stimulus credited for keeping long-term rates low and encouraging a rally on stock markets. The Dow Jones industrial futures rose 50 points to 15,748 following a 190-point slide, the Nasdaq futures climbed 16.8 points to 3,489.8 and the S&P 500 futures were ahead 5.25 points to 1,776.5. Markets have been rattled since last May, when outgoing chairman Ben Bernanke first mentioned the possibility of the central bank starting to taper its asset purchases as the U.S. economy improved. But the cuts have also had the effect of drawing money out of many emerging markets, which in turn has put pressure on currencies in countries such as India , South Africa , Russia and particularly Turkey . Investors have also been focused on fourth quarter earnings and outlooks over the past couple of weeks on hopes that a strong corporate showing will help stock prices advance further. Last year, Fed easing helped the S&P 500 charge ahead about 30 per cent. On Thursday, Potash Corporation of Saskatchewan (TSX:POT) said its fourth-quarter profit dropped 45 per cent from a year ago to US$230 million or 26 cents a share as it took hits from lower fertilizer prices and an 18 per cent cut to its workforce. Revenue fell to US$1.54 billion from $1.64 billion a year ago. Revenue was above the consensus estimate of $1.4 billion while earnings were below the general estimate of 31 cents per share. Imperial Oil Ltd. (TSX:IMO) reported it had $1.056 billion of net income in the fourth quarter, down slightly from a year earlier. The profit amounted to $1.24 per share, down two cents per share from a year earlier but well above analyst estimates. Analysts had been looking for Imperial to report 92 cents per share of adjusted earnings and 89 cents per share under standard accounting. Canadian National Railways (TSX:CN) report after the close. It is expected to earn 77 cent per share in adjusted profits in the fourth quarter, up from 71 cents per share in the prior year, according to analysts polled by Thomson Reuters. Revenues were forecast to grow 8.6 per cent to $2.75 billion . In the U.S., industrial conglomerate 3M reported that fourth-quarter earnings rose 11 per cent to $1.1 billion or $1.62 a share, which meet expectations. Sales at the maker of Scotch tape, Nexcare bandages and Post-it Notes rose 2.5 per cent to $7.57 billion , missing estimates of $7.71 billion . Royal Dutch Shell plans to slash capital spending and stop drilling for oil in the Arctic Circle as the company reported a sharp drop in fourth quarter earnings. Net profit was $1.78 billion , down 74 per cent from a year ago while production was down five per cent. Traders also looked ahead to data that will likely show the U.S. economy likely grew by a solid annual rate of 3.3 per cent in the fourth quarter, a reading slightly lower than the 4.1 per cent rate registered in the July-September period. For all of 2013, analysts think the economy grew about 1.9 per cent. For all of 2014, analysts are more optimistic with many foreseeing GDP growth of three per cent or better. Markets seemed to shrug off data showing that HSBC's China manufacturing PMI came in at 49.5, the first contraction since July. But that report served to confirmed similar manufacturing data released last week. On the commodity markets, March crude on the New York Mercantile Exchange rose 47 cents to US$97.83 a barrel. Metal prices were lower with March copper down a cent to US$3.23 a pound while February bullion lost $10.10 to US$1,252.10 an ounce. European bourses were also lower as London's FTSE 100 index lost 0.26 per cent while Frankfurt's DAX and the Paris CAC 40 were down 0.3 per cent. Earlier in Asia , continued upward pressure on the yen, viewed as a safe haven from turmoil in emerging markets trading, dragged Japan's Nikkei 225 index down 2.5 per cent. The Japanese government reported that retail sales fell 1.1 per cent in December from the month before. Hong Kong's Hang Seng down 0.5 per cent while markets in Taiwan and South Korea were closed on the eve of the lunar new year . Shares in Australia , New Zealand , and mainland China also fell.


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Source: Canadian Press DataFile


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