TSX's six-session winning streak snapped

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TSX's six-session winning streak snapped

Loonie backs off early gains after central bank warns strong currency harming pace of growth
July 22, 2009

The Toronto stock market closed lower yesterday despite another series of positive earnings reports and optimistic outlooks.

The S&P/TSX composite index broke a six-session winning streak, falling 25.39 points to 10,515.32. The drop came after the index jumped almost 800 points, riding a wave of higher oil prices and earnings reports that raised confidence the economy is improving.

"This is the most solid evidence we've seen that conditions are improving," said Jack Ablin, chief investment officer at Harris Private Bank in New York.

The Canadian dollar backed off from early sharp gains after the Bank of Canada warned the higher value of the loonie, as well as ongoing restructuring in key industrial sectors, is significantly moderating the pace of overall growth. The comment came as the bank said it was leaving its key interest rate unchanged at a quarter point.

The loonie has risen sharply over the past 10 days, benefiting from a weak U.S. dollar and the recent surge on global stock markets. The loonie declined 0.02 of a cent yesterday to 90.33 cents (U.S.), after earlier hitting the 91 cent level.

The industrials sector was the leading group, up 2.1 per cent after Canadian National Railways said it expects its business has hit bottom and volumes should pick up steam in the second half of the year.

CN said that a weakened North American economy and global slowdown caused second-quarter profits to drop nearly 14 per cent to $387 million (Canadian). Revenues fell to $1.78 billion from $2.1 billion.

"We were happy with the numbers, all things considered," said Garey Aitken, chief investment officer at Bissett Investment Management. "There's no getting around the fact volumes are way down for the transport industry. That has a big impact on revenues."

CN shares rose $1.06 to $50.55, while Canadian Pacific advanced $1.67 to $43.55.

Mining stocks were the biggest drag on the TSX. The gold sector shed 1.5 per cent as the August bullion contract in New York stepped back $1.90 to $946.90 (U.S.) an ounce. The base metals group was off almost 2 per cent. The September copper contract fell 1.8 cents at $2.451 a pound.

The TSX Venture Exchange slipped 3.45 points to 1,114.64.

New York markets extended gains as the Dow Jones industrials climbed 67.79 points to 8,915.94.

The Nasdaq composite rose 6.91 points to 1,916.2 while the S&P 500 index was up 3.45 points to 954.58.

Pleasing investors was U.S. heavy-equipment maker Caterpillar Inc., which boosted its 2009 profit outlook. Its shares jumped $2.81, or 7.7 per cent, to $39.46.

The TSX energy sector lost 0.43 per cent as the August crude contract on the New York Mercantile Exchange rose 74 cents to $64.72 a barrel.

The Canadian Press