Investors shift focus to corporate earnings
TORONTO — Canada’s main stock index dragged Wednesday as bank and consumer staples stocks fell, while markets south of the border also finished lower with the release of the latest meeting minutes from the U.S. Federal Reserve.
In Toronto, the S&P/TSX composite index dropped 26.08 points at 15,642.99. The Canadian dollar fell 0.11 of a cent at 74.48 cents US.
In corporate news, retailer Hudson’s Bay reported a $152-million net loss in its fourth quarter ended Jan. 28. A year ago, it had earnings of $370 million for the same quarter. The Toronto company, which reported after markets closed Tuesday, attributed the loss to a one-time, non-cash goodwill impairment charge of $116 million driven by weak sales at Gilt, one of its e-commerce businesses, as well as at its Saks Off 5th stores. Its shares rose nearly eight per cent, or 75 cents, to $10.45 on the TSX following the company’s earnings call.
In New York, the Dow Jones industrial average lost 41.09 points to 20,648.15. The S&P 500 pulled back 7.21 points at 2,352.95 and the Nasdaq composite index was down 34.13 points at 5,864.48.
Wall Street indices had been trading higher throughout the day, but sold off after the U.S. central bank suggested it might start trimming its balance sheet later in the year.
In minutes from its March meeting, Fed officials agreed that if the economy continues to perform as expected, a change in the committee’s reinvestment policy would be needed later this year.
The Fed has US$4.5 trillion on its balance sheet, a figure that quadrupled during the financial crisis of 2008-09 as the central bank bought up bonds to keep interest rates low and boost the economy.
The minutes also showed that there was near unanimous support for the quarter point increase to its key policy rate to a range of 0.75 per cent to one per cent, its second hike in three months.
The central bank continued to hint that it plans to raise rates three times this year, with expectations in financial markets that the next hikes will occur in June and September. The bank meets next in early May.
Allan Small, a senior adviser at HollisWealth, said investors will soon be shifting their attention to corporate earnings and economic data.
“Markets should turn its focus to earnings to see if this run-up we’ve seen recently is all that justified,” he said.
“Now we got to turn to earnings to figure that out.”
Investors were also awaiting for Friday’s March jobs report from the U.S. Labor Department to confirm that the economy is continuing to show signs of strength. On Wednesday, payroll provider ADP reported that there were 118,000 jobs added by small businesses last month, up from a revised 87,000 in February.
In commodities, the May crude oil contract was up 12 cents at $51.15 per barrel and May natural gas contracts lost three cents at $3.27 per mmBTU. The June gold contract was down US$9.90 at $1,248.50 an ounce and May copper contracts were up seven cents at $2.68 a pound.
• Meanwhile, Sentry Investments said it will pay a penalty of $1.5 million to the Ontario Securities Commission to settle allegations that it engaged in improper sales practices by giving extravagant gifts to dealers selling its financial products between 2011 and last year.
The Toronto investment firm said it has also agreed to pay OSC investigation costs of $150,000 and replace CEO Sean Driscoll.
Sentry gave “excessive non-monetary benefits” to dealing representatives at a mutual fund conference at a Beverly Hills mansion in 2015, including dinner, open bar, Dom Perignon, jewelry and free golf, adding up to more than $1,000 per guest.