TSX closes up amid gains in energy, financial, sharp drops for grocers

TORONTO – The Toronto stock market moved higher Wednesday as gains in energy and financial shares helped balance out earnings misses from two of Canada’s biggest grocers and lingering disappointment that a meeting of Chinese leaders failed to yield hoped-for economic reforms.

The S&P/TSX composite index advanced 44.62 points to 13,370.66, with downward pressure coming from mining stocks as China concerns sent copper prices falling for a second day.

Loblaw Companies Ltd. (TSX:L) fell $3.61 or 7.55 per cent to $44.23 as the grocer lowered its 2013 forecast for profit growth due to thinner margins in the second half of the year. Loblaw also said its quarterly net income was $154 million or 55 cents per share, which was down 28.6 per cent a year earlier. Ex-items, earnings were $220 million or 78 cents per share, down 3.7 per cent a year ago. However, revenue was up 1.9 per cent to $10 billion.

Metro (TSX:MRU) shares lost $3.71 or 5.65 per cent to $62 after the company posted adjusted fully diluted net earnings per share from continuing operations of $1.19, up 4.4 per cent from a year ago. However, sales were down 1.1 per cent to $2.6 billion while same- store sales fell 1.8 per cent.

“It’s competitive, we’re seeing square footage increase by some of the non-traditional players in that grocery space, whether it’s Wal-Mart, Target, others,” observed Garey Aitken, chief investment officer at Franklin Bissett Investment Management.

“And we know what demand is like. It’s pretty mature. It doesn’t go up much, so it’s just created a very challenging environment for them to contain costs to maintain margins.”

The Canadian dollar was up 0.28 of a cent to 95.58 cents US, a day after Finance Minister Jim Flaherty said the Conservative government will end seven years of federal deficits in 2015 with a $3.7-billion surplus. The new projection is nearly $3 billion better than the March budget forecast.

U.S. markets were higher with two key indexes hitting record highs — the Dow Jones industrials ran ahead 70.96 points to 15,821.63, and the S&P 500 index gained 14.31 points to 1,782. The Nasdaq climbed 45.65 points to 3,965.58.

Traders also looked to confirmation hearings for Janet Yellen as the new U.S. Federal Reserve chief on Thursday which could provide a fresh cue for financial markets. Investors will look to her testimony for indications about when the Fed might begin reducing its massive monetary stimulus that has supported a strong rally on many stock markets and kept the lid on long-term rates.

“The October jobs number, combined with some other U.S. economic data as well as comments by members of the Fed, has just heightened concern that maybe the tapering will commence sooner than originally thought and maybe as early as December of this year,” Aitken said.

“We’re starting to really split hairs and navel gaze when we get into that but . . .there’s just a little more unease about that today than there was two weeks ago.”

Meanwhile, Communist party leaders in Beijing wrapped up a four-day meeting on the economy late Tuesday. Reform advocates had hoped for major changes such as curbing the dominance of state industry.

But they were disappointed as the ruling party said only that market forces would play a “decisive role” in China’s economy, an upgrade from “core role” assigned to the market.

The metals and mining sector was a major drag, down almost two per cent as copper prices fell for a second day in the wake of the Chinese leadership meeting, down seven cents to US$3.16 a pound. First Quantum Minerals (TSX:FM) lost 83 cents or 4.28 per cent to C$18.56 while HudBay Minerals (TSX:HBM) shed 18 cents to $8.10.

Energy companies led advancers, up 0.86 per cent as December crude on the New York Mercantile Exchange gained 84 cents to US$93.88 a barrel a day after falling to a five-month low.

Traders are waiting for the latest data on U.S. crude stocks. Data for last week is expected to show an increase in crude oil stocks of 1.8 million barrels. That would mark the eighth straight weekly increase.

Suncor Energy (TSX:SU) was up 73 cents to C$37.23.

Financials were also supportive as Bank of Montreal (TSX:BMO) gained 63 cents to $73.44.

Tech stocks were mainly higher, paced by a gain of 51 cents to $37.62 for CGI Group (TSX:GIB.A), a day before the company releases its quarter earnings.

The gold sector was ahead about 0.3 per cent as the December bullion contract erased early gains to close down $2.80 at US$1,268.40 an ounce. Argonaut Gold (TSX:AR) ran up 27 cents to C$5.65.