Friday October 31, 2014




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TSX adds to series of gains amid strong earnings news, improving global economy

TORONTO - The Toronto stock market registered a solid gain to cap a positive week on Friday, with the TSX powered by earnings news and positive manufacturing data from China.

The S&P/TSX composite index was up 74.67 points at 13,299.42 in an advance spread across all sectors save for minor declines in tech and health-care stocks.

The Canadian dollar was down 0.27 of a cent to 95.65 cents US, lower for a third day in the wake of a decision by the Bank of Canada to remove its tightening bias and downgraded its economic forecast. The move has led analysts to believe that interest rate hikes are off the table until 2015, leaving the loonie to fall 1.5 cents this week.

U.S. indexes were higher amid well-received earnings reports from Amazon and Microsoft.

The Dow Jones industrials closed up 61.07 at 15,570.28, the Nasdaq ran up 14.4 points to 3,943.36 and the S&P 500 index rose 7.7 points to 1,759.77.

After the close Thursday, Amazon.com posted a quarterly loss of $41 million, or nine cents per share, matching analyst expectations. Revenue jumped 24 per cent $17.09 billion against expectations of $16.76 billion and its stock surged US$31.18, or 9.39 per cent, to $363.39.

Microsoft’s net income in three months through Sept. 30 grew 17 per cent to $5.24 billion, or 62 cents per share, from $4.47 billion, or 53 cents per share, a year ago. That beat the 54 cents expected by analysts. Revenue rose 16 per cent to $18.53 billion, also beating the $17.79 billion analysts had been expecting and its shares were ahead $2.01, 5.96 or per cent, to $35.73.

It was a quiet day for earnings out of Canada after a week that saw positive earnings reports from the likes of Teck Resources (TSX:TCK.B), Goldcorp (TSX:G), Canadian National Railways (TSX:CNR) and Canadian Pacific Railway (TSX:CP).

"Some good numbers are coming out of corporations and then the international markets (and) the eurozone are starting to look better," said Sadiq Adatia, chief investment officer at Sun Life Global Investment.

"The confidence is starting to improve from that standpoint and heading into the new year, people are not seeing anything that might pop up that might derail this rally right now."

The TSX ended the week up 1.24 per cent, leaving the Toronto market up almost seven per cent year to date.

CP was in focus Friday after its biggest shareholder sharply narrowed its position. Bill Ackman's Pershing Square Capital Management has sold about a third of its holdings in the railway.

CP, which reported a record quarterly profit on Wednesday, said the hedge fund has sold 5.96 million CP shares for about US$140 a share, bringing the total divestment so far to seven million shares. On Friday, CP shares added $2.09 to C$150.04, which is more than triple their level when Pershing Square began building up its stake in the railway.

The beaten down utilities sector led advancers, up 1.27 per cent. The interest rate sensitive sector has been under selling pressure since June amid speculation over when the U.S. Federal Reserve may start to wind down its monthly US$85 billion of bond purchases. That speculation pushed U.S. government bond yields substantially higher from around 1.6 per cent in early May to almost three per cent in September. The benchmark U.S. 10-year Treasury yield has since backed away to about 2.5 per cent.

Canadian Utilities (TSX:CU) added 85 cents to C$38.08 and Emera (TSX:EMA) climbed 44 cents to $31.42.

Telecoms also suffered from those high U.S. yields and on Friday the sector rolled ahead 1.16 per cent, with Telus (TSX:T) rising 63 cents to $36.84.

Commodities were mixed as December crude moved ahead 74 cents to US$97.85 a barrel and the TSX energy sector climbed one per cent. Suncor Energy (TSX:SU) gained 59 cents to C$37.66.

Financials were also strong with Bank of Montreal (TSX:BMO) ahead 47 cents to $72.93.

The TSX gold sector was ahead one per cent while December bullion rose $2.20 to US$1,352.50 an ounce. Iamgold (TSX:IMG) gained 10 cents to C$5.70.

The base metals component ticked ahead 0.14 per cent after gaining Thursday in the wake of data showing stronger than expected expansion in the Chinese manufacturing sector as December copper inched up one cent to US$3.27 a pound. Teck Resources was 27 cents lower to C$30.27.

The tech sector was also negative with CGI Group (TSX:GIB.A) down 30 cents to $35.59. A subsidiary, CGI Federal, was one of the main contractors for the U.S. government's troubled health-care insurance website and its shares have slid about eight per cent since Oct. 16. A congressional committee was told this week that the government didn't allow enough time to test the system before it went online Oct. 1.



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