U.S. debt ceiling woeS clip marketS
By Ma lcolM Mo rrison
TORONTO • The Toronto stock market gave up a solid early gain and closed lower Wednesday as an impending deadline for dealing with the U.S. budget and debt ceiling continued to cast a shadow over trading.
The S&P/TSX composite index had been up as much as 65 points, but closed down 12.18 points at 12,836.71, reflecting growing weakness in telecoms, industrials and smartphone maker BlackBerry Ltd.
The Canadian dollar also erased early gains and was down US0.10¢ at US96.97¢.
U.S. indexes moved deeper into negative numbers amid reports that Wal-Mart Stores Inc. was cutting orders from suppliers this quarter and next to address rising inventories. It’s the latest sign that Wal-Mart’s sales have been slow after the company cut its full-year sales forecast in August.
The retailer later responded that the reports were “misleading.” Wal-Mart stock was down US$1.10 to US$74.65 after falling as low as US$73.56.
Meanwhile, investors looked ahead to an Oct. 1 deadline for U.S. political leaders. At issue is a temporary spending bill required to keep the U.S. government fully open after the start of the new budget year.
The government reaches its borrowing limit, or debt ceiling, early in October. If Congress doesn’t raise that limit, the government won’t be able to pay all its bills, a blow to confidence in the world’s biggest economy. Treasury Secretary Jacob Lew says the government will have exhausted its borrowing authority by Oct. 17, leaving the United States with just US$30-billion cash on hand to pay its bills.
The Dow Jones industrial average fell 61.33 points to 15,273.26, Nasdaq was 7.15 points lower at 3,761.1 and the S&P 500 index was down 4.65 points to 1,692.77.
Investors well remember the last time Democrats and Republicans locked horns over raising the debt limit during the summer of 2011. Indexes were hard hit as traders worried about a possible default and the damage done to the economy from a possible government shutdown.
The information technology sector was the biggest percentage decliner, down 1.3% as BlackBerry shares continued to deteriorate as The Globe and Mail reported that Fairfax Financial Holdings Ltd. is seeking more than US$1-billion from other investors to help fund a takeover of BlackBerry. Fairfax said on Monday that it’s leading a group that would buy the Canadian smartphone maker for US$4.7-billion, paying shareholders US$9 a share.
The Globe said that as of Tuesday only one pension fund was seriously considering joining the Fairfax-led consortium — the Ontario Teachers’ Pension Plan. BlackBerry fell 52¢, or 5.9%, to $8.26 on TSX and lost US52¢, or 6.15 %, to US$8 in New York.