TSX DOWN ON WORRY OVER RATE INCREASE
TORON TO • The Toronto stock market closed lower Tuesday amid concerns about higher interest rates and whether the market is set for a pullback.
The S&P/TSX composite index lost 89.91 points to 15,081.32 as resource stocks fell alongside prices for oil and gold. The Canadian dollar was off US0.38¢ to US92.95¢.
New York indexes were lacklustre after Federal Reserve chair Janet Yellen said in delivering the Fed’s latest economic report to Congress that the economic recovery is not yet complete and the central bank intends to keep providing significant support. But she also said if labour market conditions continue to improve, the Fed could raise rates sooner than currently projected — the summer of 2015.
The Dow Jones industrial average gained 5.26 points to 17,060.68, Nasdaq fell 24.03 points to 4,416.39 and the S & P 500 index was off 3.82 points at 1,973.28.
The Fed’s report also pointed out that some broad equity price indexes have increased to all-time highs in nominal terms since the end of 2013.
It observed that “valuations in some sectors do appear substantially stretched, particularly those for smaller firms in the social media and biotechnology industries.”
By suggesting some stocks could be overvalued, the Fed is adding to a growing belief among some market watchers that the market is due for a pullback, said Drew Wilson, an equity analyst at Fenimore Asset Management. Earlier, investors digested data that showed U.S. retail sales for June rose by 0.2%, less than the 0.6% gain expected.
Traders also focused on another round of strong earnings from the U.S. financial sector as JPMorgan Chase & Co. and Goldman Sachs Group Inc. both beat analyst expectations in the most recent quarter.
JPMorgan Chase posted second-quarter profit of US$1.46 a share versus the US$1.29 a share analysts had expected and its shares rose 3.52% to US$58.27.
And Goldman Sachs reported quarterly earnings per share of US$4.10 versus US$3.70 a year ago, handily beating expectations of US$3.05 a share. Its shares gained 1.3% to US$169.17.
After the close, Yahoo! Inc. reported earnings per share ex-items of US37¢, a US1¢ below expectations.
The gold sector was the biggest percentage decliner, down about 2.6% as August bullion erased early gains to move down US$9.40 to US$1,296.90 an ounce after falling US$30 on Monday. The base metals group was right behind, down 2.4% as September copper was unchanged at US$3.25 a pound.
The energy component dropped 1.8% as oil prices fell below US$100 a barrel for the first time since May in the wake of the U.S. retail numbers. August crude on the New York Mercantile Exchange dropped US95¢ to US$99.96. Prices have dropped sharply over the last week as worries about supply disruptions from Iraq eased and on the prospect of more supplies from Libya.