TSX little changed; traders look for Fed tapering clues in U.S. jobs data

TORONTO – The Toronto stock market closed little changed Thursday ahead of a much-anticipated U.S. job creation report Friday that could provide an indication of where the Federal Reserve will go in cutting back on stimulus.

The S&P/TSX composite index edged up 14.78 points to 13,629.41, lifted by gains in industrials and financials but held back by declining energy and mining stocks amid lower commodity prices. .

The Canadian dollar fell 0.41 of a cent to 92.15 cents US, its lowest close since late September 2009 amid weak housing data.

Canada Mortgage and Housing Corp. said housing starts came in at an annual rate of 189,672 units in December, a decrease from 197,797 in November.

Other data from Statistics Canada showed that contractors took out $6.8 billion worth of building permits in November, down 6.7 per cent from October.

U.S. indexes were mainly lacklustre as traders took in a strong reading on American jobless insurance claims. The U.S. Labor Department reported that applications for jobless insurance fell by 15,000 last week to 330,000.

The Dow Jones industrials lost 17.98 points to 16,444.76, the Nasdaq fell 9.42 points to 4,156.19 and the S&P 500 index added 0.64 of a point to 1,838.13.

Traders hope that Friday’s U.S. non-farm payrolls report will provide some direction as to how the U.S. Federal Reserve plans to proceed on further tapering to its massive monthly bond purchases. The key stimulus program was cut last month from $85 billion a month to $75 billion, making further cuts contingent upon economic performance, particularly the job market.

U.S. markets had finished in the red Wednesday after minutes from the Fed meeting last month failed to provide any clues
as to how quickly the Fed might proceed.

But there are concerns that a strong jobs report could persuade the Fed to accelerate its tapering program.

Data released Wednesday indicated that Friday’s government employment report could exceed expectations that 195,000 jobs were created last month. Payroll firm ADP said that the U.S. private sector alone created 238,000 jobs in December.

“Better news, which should say the economy is stronger, has a negative tone (because it suggests) tapering will be a lot faster,” observed Sadiq Adatia, chief investment officer at Sun Life Global Investment.

“This is just a short-term thing right now. I think people will see economic news as being positive and I think from that standpoint that we will see a decent year on the market.”

Canadian jobs data also comes out on Friday with expectations that about 13,000 jobs were create in December.

The industrials sector led advancers, up 0.56 per cent as Canadian Pacific Railway (TSX:CP) was ahead $3.45 to $161.19.

The Transportation Safety Board says their preliminary investigation into a Canadian National Railways train derailment in northwestern New Brunswick has found a cracked wheel and a broken rail but it’s too early to say what caused the train to leave the tracks. A CN spokesman says the priority now is to extinguish the fire on three cars carrying crude oil and liquefied petroleum gas, along with burning diesel.

CN shares were six cents lower at $58.57.

Financials also turned positive with Manulife Financial (TSX:MFC) ahead 64 cents to C$21.99.

The base metals sector was down 1.86 per cent as March copper lost four cents to US$3.30 a pound. Teck Resources (TSX:TCK.B) dropped 56 cents to C$25.72 while HudBay Minerals (TSX:HBM) fell 24 cents to $8.57.

Meanwhile, Adatia said there is some unease about the fact that markets have been generally lower so far this year.

“Because the markets haven’t moved up, people are getting a little worried and thinking maybe the metals aren’t going to move up this year and you are seeing people not very positive about metals right now.”

The energy sector also weighed on the TSX, down 0.67 per cent as the February crude contract on the New York Mercantile Exchange gave back 67 cents to US$91.66 a barrel. Penn West Petroleum (TSX:PWT) shed 37 cents to C$9.03.

Husky Energy Inc. has given the green light to two new heavy oil construction projects in Saskatchewan in the Lloydminister region. Husky says the two projects will deliver a total of 20,000 barrels per day, with the first oil expected in 2016. Its shares were down three cents at $33.19.

Performance in the gold sector was mixed as February bullion rose $3.90 to US$1,229.40 an ounce. Goldcorp (TSX:G) gained 44 cents to C$24.31 while Agnico Eagle Mines (TSX:AEM) faded 71 cents to $28.22.

On the earnings front, Quebec-based pharmacy chain Jean Coutu (TSX:PJC.A) had $62.5 million of net income or 30 cents a share in its fiscal third quarter, an increase from $56.2 million a year earlier and two cents higher than analyst estimates. However, the Jean Coutu’s revenue were below estimates, falling to $712.5 million from $716.6 million. Its shares lost 14 cents to $18.49.