News Column

Toronto stock market to open lower amid mixed earnings, interest rate concerns

July 31, 2014

Malcolm Morrison, The Canadian Press

TORONTO - The Toronto stock market headed for a lower open amid another mixed bag of earnings news and concerns about when the U.S. Federal Reserve may hike interest rates.

The loonie was down 0.06 of a cent to 91.67 cents US as Statistics Canada said gross domestic product grew by 0.4 per cent during the month, better than the 0.3 per cent gain that economists had expected.

U.S. futures were lower with the Dow Jones industrial futures down 86 points to 16,735, the Nasdaq futures lost 25.5 points to 3,943 and the S&P 500 futures declined 10.8 points to 1,954.3.

The U.S. Federal Reserve wrapped up its interest rate meeting Wednesday and indicated that it will keep short-term interest rates low "for a considerable time" after it ends its bond purchases, likely in October. Markets have generally expected the Fed to start hiking rates mid-2015, but much stronger than expected economic growth in the second quarter has investors concerned that the Fed could act sooner to raise rates.

Data released on Wednesday showed that U.S. gross domestic grew by an annual pace of four per cent in the second quarter after contracting 2.1 per cent in the January-March period because of severe winter weather.

On Thursday, Bombardier Inc. (TSX:BBD.B) reported quarterly net income of US$155 million, or eight cents per share, compared with US$180 million, or 10 cents per share, for the same quarter in 2013. Excluding items, adjusted net income amounted to US$192 million, or 10 cents — a cent ahead of estimates.

Valeant Pharmaceuticals International Inc., (TSX:VRX) which is making a hostile takeover bid for Botox maker Allergan, posted a quarterly net profit of $126 million or 37 cents a share. Revenues jumped 86 per cent to $2.04 billion, helped by a strong performance in its U.S. contact lens business and its U.S. Bausch + Lomb consumer eye care businesses. Adjusted income was $651 million, or $1.91 per share, missing estimates of $1.98 a share.

After the close Wednesday, Barrick Gold Corp. (TSX:ABX) delivered a US$269-million quarterly net loss and $159-million of adjusted earnings in the second quarter, missing analyst estimates on both counts. The adjusted profit amounted to 14 cents US per share, down from 66 cents a year earlier and two cents a share below analyst estimates. It also said the average cost of producing an ounce of gold in 2014 will be lower than previously estimated.

Suncor Energy Inc. (TSX:SU) posted net income of $211 million, or 14 cents per share, compared to $680 million, or 45 cents per share, a year earlier. Operating earnings, which strip out the effects of unusual items, came in at $1.14 billion or 77 cents a share, 20 cents below estimates.

Prices were mixed on commodity markets where September oil moved 71 cents lower to US$99.56 a barrel.

September copper edged a penny higher to US$3.25 a pound, while December gold faded 70 cents to US$1,296.20 an ounce.

Markets seemed to have little reaction so far to Argentina moving into a debt default for the second time in 13 years. A midnight Wednesday deadline to reach a deal with holdout bondholders came and went with Argentine Economy Minister Axel Kicillof holding firm to his government’s position that it could not accept a deal with U.S. hedge fund creditors it dismisses as "vultures." Ratings agency Standard & Poor’s downgraded Argentina’s foreign currency credit rating to "selective default" because of missed interest payments.

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Source: Canadian Press DataFile

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