TSX slightly higher, U.S. consumer confidence drops, Canadian economy stalls

TORONTO – The Toronto stock market gave up early strong gains and closed little changed Tuesday amid reports showing a sharp retreat in American consumer confidence while the Canadian economy stalled again in November.

The S&P/TSX composite index gained 15.74 points to 12,452.15, while the TSX Venture Exchange edged 8.34 points higher at 1,631.85.

Statistics Canada reported that real gross domestic product edged down an unexpected 0.1 per cent in November after showing no growth in October. Economists had looked for the economy to grow by 0.2 per cent.

The agency said lower output in the energy sector accounted for most of the November decline, as oil and gas extraction fell 2.5 per cent.

In the U.S., The Conference Board, a private research group, said that its Consumer Confidence Index now stands at 61.1, down from a revised 64.8 in December. Economists had expected a reading of 68.

“It put a damper on things, no question,” said Robert Gorman, chief portfolio strategist for TD Waterhouse.

The Conference Board said that even though U.S. consumers were more upbeat about jobs, they were less optimistic about income prospects.

The two reports combined to leave the Canadian dollar unchanged at 99.72 cents US, well off early highs of 100.35 cents US.

U.S. markets were mainly weaker as the Dow Jones industrials dropped 20.81 points to 12,632.91, the Nasdaq composite index was up 1.9 points to 2,813.84 and the S&P 500 index slipped 0.61 of a point to 1,312.4.

Markets had earlier advanced sharply after eurozone countries agreed on a new treaty to stop overspending amid widespread calls for the region to deal decisively with its government debt woes. The hope is that the tighter rules contained in a new treaty, commonly known as the fiscal compact, will restore confidence in the euro and convince investors that all eurozone members will get their debts under control.

For now, investors appear to be giving European policy-makers the benefit of the doubt, especially as there are hopes Greece will arrive at a debt-reduction deal between the country and its private creditors, possibly as soon as this week.

Finance Minister Evangelos Venizelos said Tuesday that Greece has all but concluded a crucial deal to write off half its privately held debt and is now working on new austerity measures needed to secure continued bailout loans.

Greece and its bondholders are trying to reach a deal to significantly cut the country’s debt and pave the way for it to receive a much-needed €130-billion bailout.

Despite the negative showing Tuesday, North American markets were set to exit January trading with a solid advance with the TSX up 4.15 per cent and the Dow industrials up 3.4 per cent for the month.

“It was a strong start to the year; the sentiment in general improved quite a bit,” Gorman said.

But he cautioned the rest of the year will be challenging.

“I do think you are going to see spottier numbers on the U.S. side at the consumer level. I think you’re going to see retail sales numbers that certainly aren’t consistent with the strong numbers we saw last fall,” he added.

“And corporate earnings growth is slowing as the recovery matures. Generally not bad but not the very strong year over year growth that you have seen previously (but) that’s to be expected.”

The consumer staples sector was the strongest group and shares in grocer Metro Inc. (TSX: MRU.A) gained $1.58 to $54.74 as the company boosted its dividend nearly 12 per cent. It also reported that first quarter profits rose 8.6 per cent from a year ago to $103.7 million.

The TSX energy sector edged up 0.14 per cent as the March crude contract on the New York Mercantile Exchange also lost early gains to close down 30 cents at US$98.48 barrel.

Imperial Oil Ltd. (TSX:IMO) shares moved up 92 cents to C$47.78 after the energy giant reported that fourth-quarter profit rose 26 per cent to $1 billion. Full-year earnings rose 53 per cent to $3.4 billion, the second-highest on record. Imperial also hiked its quarterly dividend one cent to 12 cents.

In the U.S., Exxon Mobil Corp., which owns a majority stake in Imperial, said its fourth-quarter profit rose two per cent to US$9.4 billion as higher oil prices made up for a drop in production. Benchmark crude prices rose 10.3 per cent in the final three months of 2011. Earnings came in at $1.97 a share, which met expectations and its shares dipped $1.74 to US$83.74.

The base metals component was slightly higher as copper prices lost early gains and was down three cents at US$3.80 a pound. Still, copper has surged 10.3 per cent this month, partly on hopes that China is set to further relax lending standards to encourage growth. China is the biggest consumer of the metal, which is viewed as an economic bellwether as it is used in so many industries.

HudBay Resources (TSX:HBM) was ahead eight cents to C$11.71.

The gold sector was flat even as bullion prices advanced, with the April contract up $7.60 to US$1,738.60 an ounce. Goldcorp Inc. (TSX:G) faded 28 cents to C$48.50.

Research In Motion Ltd. (TSX:RIM) was having a difficult day in the social media sphere after the BlackBerry maker unveiled four cartoon characters that broke down its user base into four market segments — naming each after a superhero. Some critics labelled RIM’s effort to describe its users “lame” and “embarrassing” while the company says their infographic was just intended to be a bit of fun. Its shares closed down 35 cents to $16.72.

Junior miner Verde Potash Plc (TSXV:NPK) says a preliminary economic assessment report concludes that its planned potash project in Brazil will cost US$654 million to build and its shares fell $1.66 or 19.39 per cent to $6.90.

In other earnings news, Mattel Inc. reported that strong holiday demand for toys including Barbie, Hot Wheels and American Girl helped push its fourth-quarter net income up 14 per cent to US$370.6 million or $1.07 per share. Its shares jumped $1.47 to US$31.