Toronto stock market closes flat, traders cautious ahead of Alcoa earnings

TORONTO – The Toronto stock market closed little changed Tuesday as traders hoped for a favourable forecast from Alcoa Inc. when the resource giant kicked off the fourth-quarter corporate earnings season after the close.

The S&P/TSX composite index edged up 5.26 points to 12,504.81 while the TSX Venture Exchange rose 1.49 points to 1,225.38.

The Canadian dollar was down 0.1 of a cent to 101.35 cents US.

U.S. markets were lower as the Dow Jones industrials declined 55.44 points to 13,328.85, the Nasdaq was down seven points to 3,091.81 and the S&P index slipped 4.74 points to 1,457.15.

Alcoa (NYSE:AA) met profit expectations, turning in earnings per share of six cents. Revenue came in at US$5.9 billion, handily beating expectations of $5.6 billion.

The aluminum company has struggled against a backdrop of tepid economic growth around the globe, which has resulted in aluminum prices falling 15 per cent from a year ago.

But Alcoa said it expects global aluminum demand growth of seven per cent in 2013 and its shares were ahead 1.5 per cent in after hours trading. Alcoa stock had closed unchanged at US$9.10 in New York.

Alcoa traditionally starts the run of U.S. quarterly earnings. The company is viewed as a bellwether for the overall economy as its products are used in everything from cars to aircraft and appliances.

It’s also viewed as a good indication of where the overall resource sector is at, an important consideration for a market like the TSX that is heavily weighted in favour of commodity-based companies.

But Fred Ketchen, manager of equity trading at Scotia Capital, noted that weak economic conditions will rule out a strong recovery in the resource sector for now.

“The economic growth, while it may be calm and steady, it isn’t robust. Until we get some real growth and demand, I don’t see these commodity prices moving a whole lot,” he said.

“I think it’s going to be some time before we see any real growth in any of these (resource) sectors quite frankly.”

A major weight on the New York market was aircraft maker Boeing. Its stock was down 2.63 per cent on top of a two per cent tumble Monday after a 787 Dreamliner operated by Japan Airlines Co. caught fire on the ground at Boston’s Logan International Airport. And on Tuesday, another 787 was forced to turn back to the terminal with a fuel leak.

The metals and mining sector led decliners on the TSX, down 1.17 per cent as the March copper contract on the New York Mercantile Exchange lost a penny to US$3.67 a pound. Teck Resources (TSX:TCK.B) shed 95 cents to C$36.20 while First Quantum Minerals (TSX:FM) was off 17 cents at $21.54.

Oil prices erased early gains ahead of the release of data expected to show a rise of 1.5 million barrels in crude oil stocks and 2.6 million barrels in gasoline stocks last week, according to a survey of analysts by Platts, the energy information arm of McGraw-Hill Cos.

The American Petroleum Institute was releasing its report on oil stocks later Tuesday.

The February crude contract dipped four cents to US$93.15 a barrel.

The energy sector stepped back 0.4 per cent and Canadian Natural Resources (TSX:CNQ) lost 44 cents to C$29.34.

The TSX was well off the worst levels of the session as gold snapped a three-day losing streak with the February bullion contract up $15.90 to US$1,662.20 an ounce. Kinross Gold (TSX:K) was up 20 cents to C$9.39.

Gold prices have suffered in recent days because of uncertainty about whether the U.S. Federal Reserve might end its stimulus program of bond buying in the second half of 2013. Minutes from the Fed’s latest policy meeting showed a split over how long to continue the purchases amid concerns that they could destabilize the economy.

The bond buying, known as quantitative easing, has supported bullion prices because of worries the program would drive inflation higher. Gold is seen as a hedge against inflation.

Goldcorp Inc. (TSX:G) shares were ahead $1.12 to C$35.81 after it announced Monday after the close that it is raising its monthly dividend by 11 per cent to five cents per share.

Elsewhere in the gold sector, African Barrick Gold PLC stock plunged about 20 per cent on the London stock exchange after Canadian parent Barrick Gold Corp. (TSX:ABX) announced that talks about a potential sale to China National Gold have broken off without a deal. The Toronto-based Barrick Gold owns about three-quarters of the ABG shares outstanding and Barrick Gold shares faded 43 cents to C$33.14.

Information technology stocks provided the most lift as CGI Group (TSX:GIB.A) rose $1.03 to $23.80.

In economic news, traders took in data showing that the chronic government debt crisis in Europe has pushed unemployment to record highs in the 17-country eurozone. The jobless rate hit 11.8 per cent in December, up from 11.7 per cent the previous month.

Investors found some comfort in a separate report showing business and consumer sentiment in the eurozone rose in December by more than analysts were expecting and that retail sales edged up in November. That suggests that the improvement in financial markets in those months helped economic activity stabilize.