News Column

Stocks tilt lower Tuesday

August 5, 2014

Geopolitics, earnings factor in

Canada's main stock index declined on Tuesday as weak economic data from China raised fears of a slowdown in the world's second-biggest economy and weighed on shares of natural resource producers, for which China is a major market.

The S&P/TSX composite index moved lower 27.55 points, to close at 15,187.71.

The Canadian dollar toppled 0.46 cents at 91.23 cents U.S.

The Toronto stock market's resource-sensitive benchmark index shed 1.6% last week, and extended the fall on Tuesday as the prices of commodities such as gold and oil traded lower. The market was closed Monday for a holiday.

The Chinese survey indicated that growth in the services sector slowed sharply in July to near a nine-year low.

The continuing crises in the Middle East and Ukraine also had a negative impact on the market.

Financials, the index's most heavily weighted sector, gave

back ground, Bank of Nova Scotia lost 0.2% to $73.32, and Toronto-Dominion Bank fell 0.5% to $56.24.

Shares of energy producers followed oil prices lower, with Suncor Energy slipping 0.6% to $43.19.

The gold-mining sector was pulled lower by weakness in the bullion price. Barrick Gold was down 0.6% at $19.78, though Goldcorp actually gained 0.3% to $30.37.

Recent acquisitions helped Saputo post a higher quarterly profit on Tuesday. Shares of the dairy producer climbed 2% to $68.95.


The TSX Venture Exchange slipped 6.76 points to 993.87

Eight of the 14 Toronto subgroups were higher, with consumer staples up 0.9%, industrials, ahead 0.7% and utilities, gaining 0.6%.

The half-dozen laggards were weighed mostly by health-care, down 2.9%, metals and mining stocks, off 0.9%, and energy, slipping 0.7%.


Geopolitical risk reared its ugly head once again, sending stocks down, down, down Tuesday. The Dow and S&P 500 are back at the levels they last saw in May.

The Dow Jones Industrials tumbled 139.81 points to 16,429.47

The S&P 500 lost 18.78 points to 1,920.21. The NASDAQ composite docked 31.05 points to 4,352.84.

The Dow is back in negative territory for the year, giving back all the gains it got from last week's good jobs numbers.

Energy stocks were getting especially hammered -- down more than twice the rate of the S&P 500 -- an indication of the role Russia still plays in global energy markets.

Target reported that its holiday-season credit card breach cost $148 million U.S., to be offset with $38 million U.S. in insurance money. The company also lowered its guidance for the second quarter's earnings, which come out on August 20. Its stock is down almost 4%, making it one of the worst performers in the S&P 500.

Dollar General, up 3.5% is weighing a bid for Family Dollar, which is trading 2% higher, Bloomberg reports. It's competing with Dollar Tree, down more than 2.5%, which announced an $8.5 billion U.S. for Family Dollar just last week.

The dollar store industry is under a lot of pressure as working class families continue to struggle during the recovery. Whichever company fails to acquire Family Dollar will get stuck in a distant, dangerous second place.

Purse and accessory maker Coach impressed investors with a better-than-expected quarter, but Wall Street's bar was set very low. Sales and profits did not fall as much as anticipated from the same time last year, but they still declined.

North American sales dropped 16% in that time, though increasing international sales softened the blow. The stock is up 4% and leading the S&P 500.

Nor were a couple of conflicting economic reports helping cheer investors up. The Institute of Supply Management released data that said American manufacturing is gradually expanding, but data provider Markit released similar figures for the service sector that said things weren't moving much either way.

Prices for 10-year U.S. Treasuries were lower, raising yields to 2.48% from Monday's 2.50%. Treasury prices and yields move in opposite directions.

Oil prices sank 90 cents to $97.39 U.S. a barrel.

Gold prices recovered $1.90 to $1,290.80 U.S. an ounce.

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Source: Baystreet Stock Market Update (Canada)

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