Federal Reserve tapering concerns send Toronto stock market tumbling 191 points

TORONTO – The Toronto stock market tumbled almost 200 points Wednesday as investors remained focused on whether the U.S. Federal Reserve might start to claw back its stimulus measures as early as next week.

The S&P/TSX composite index dropped 190.59 points to 13,133.42 amid developments that also included lower oil prices and disappointing earnings from Canada’s oldest company.

Hudson’s Bay Co. (TSX:HBC) reported a larger net loss in its latest quarter, mostly due to costs related to the acquisition of U.S. retailer Saks Inc. last month.

The retailer reported a net loss of $124.2 million, or $1.04 per share, compared with $14.4 million, or 14 cents per share, a year earlier. Overall retail sales rose by 5.8 per cent. Ex-items, earnings were seven cents a share, which missed estimates by three cents and its shares fell $1.19 or 5.95 per cent to $18.80.

The Canadian dollar gained 0.09 of a cent to 94.4 cents US.

New York also sold off amid growing expectations in the markets that the Fed will decide to start reducing its $85 billion a month of financial asset purchases following a run of solid economic data. Analysts say investors appear to be holding back from big trading decisions ahead of the next central bank meeting a week from now.

“So whether it’s jobs data, GDP revisions, a host of other data points — things are going in the right direction,” said Garey Aitken, chief investment officer at Franklin Bissett Investment Management in Calgary.

“To the extent you have a data-dependent mindset among the Fed decision-makers, I think it does bring the notion of tapering to be a more likely event here.”

The Dow Jones industrials fell 129.6 points to 15,843.53, the Nasdaq gave back 56.68 points to 4,003.81 and the S&P 500 index declined 20.4 points to 1,782.22.

An apparent budget deal in the U.S. Congress failed to make much of an impact even though it would mean another partial shutdown of the U.S. government would be avoided. Most interest rests on the U.S. debt ceiling, which has to be raised early next year to avoid a debt default.

Losses were spread across all TSX sectors with the battered gold component leading decliners with slide of about 3.7 per cent as February bullion dipped $3.90 to US$1,257.20 an ounce. The component has skidded 50 per cent this year while gold has fallen 25 per cent on the Fed tapering speculation. Barrick Gold (TSX:ABX) faded 62 cents to C$17.29 while Goldcorp (TSX:G) shed 66 cents to $22.42.

The industrials group was down 1.84 per cent as Canadian National Railway (TSX:CNR) shares dropped $1.90 to $57.65 even as the company said that it expected to deliver double-digit earnings growth in 2014 on a continued economic recovery. The country’s largest railway says its adjusted diluted earnings should be on top of the $3.05 to $3.10 per share forecast for 2013, a level that is in line with analyst expectations.

The energy sector fell 1.64 per cent while January crude dropped $1.07 to US$97.44 a barrel, even as the U.S. Energy Information Administration said that crude supplies fell by a much more than expected 10.6 million barrels last week. Analysts had expected a decline of 2.8 million barrels. Cenovus Energy (TSX:CVE) declined 99 cents to C$30.20.

Natural gas giant Encana Corp. (TSX:ECA) plans to increase its production of natural gas liquids by 30 per cent next year, as it focuses spending in five resource areas across North America. Encana does not expect its forecasted production levels to change from last year, even though it plans on cutting its capital investment by 10 per cent. Last month, it announced it was slashing its workforce by 20 per cent, cutting its dividend and spinning off a large chunk of its Alberta land holdings into a new public company. EnCana shares shed $1.21 to C$19.17.

March copper rose three cents to US$3.29 a pound and the base metals sector gave back 2.16 per cent. Teck Resources (TSX:
TCK.B) lost 88 cents to C$24.67.

The telecom sector dropped 1.19 per cent and Rogers Communications (TSX:RCI.B) was down 91 cents at $47.68.

Financials fell 1.16 per cent as Laurentian Bank (TSX:LB) missed expectations. Restructuring costs caused its quarterly net profit to plummet 41 per cent to $27.7 million in the fourth quarter. Adjusting for one-time items, net income dipped three per cent to $35.2 million or $1.14 a share, lower than the $1.31 that analysts had expected. Revenue of $215.5 million missed expectations of $220.5 million and Laurentian shares gave back $2.19 to $44.98.