Stimulus comments support tsX advance
TORONTO • The Toronto stock market registered a solid advance Thursday as the next likely leader of the U.S. Federal Reserve made it clear the American economy will need to show more improvement before the central bank starts to withdraw economic stimulus.
The S&P/TSX composite index gained 60.72 points to 13,431.38, with support also coming from a strong earnings report from IT company CGI Group and one matching analyst expectations from Kinross Gold
The Canadian dollar fell 0.05¢ to US95.53¢.
U.S. indexes gained momentum as traders took in confirmation hearings on Janet Yellen’s nomination to lead the Federal Reserve. The Dow Jones industrials were up 54.59 points to 15,876.22, the Nasdaq added 7.16 points to 3,972.74 and the S&P 500 climbed 8.62 points to 1,790.62.
The session got off to a largely positive start as Ms. Yellen’s prepared remarks were released Wednesday after the market close and indicated she won’t be straying from the low interest rate policies of outgoing chairman Ben Bernanke.
She said the economy has regained ground lost to the recession, but that U.S. unemployment at its current level of 7.3% remains too high. Later, during a question and answer session with senators, Ms. Yellen said the Fed understands that quantitative easing, involving the monthly purchase of US$85-billion of bonds, can’t go on forever. But she made it clear that “it is important not to remove support while the recovery is still fragile.”
“It is also important to remove accommodation when the right time comes,” she added.
A strong rally on markets in October has largely stalled this month on concerns that the Fed could start tapering as soon as December. The Fed’s bond purchases have kept long-term rates low and supported a strong advance on many markets.
“Regardless of when this tapering actually comes to be, and the Fed knows it has this massive balance sheet, it knows it has to start the process to exit,” said Stephen Lingard, portfolio manager at Franklin Multi-asset strategies.
“But that doesn’t mean that tighter policy or even less loose policy is imminent.”
The gold sector led advancers, up about 2.3% while bullion prices advanced with December gold ahead $17.90 to US$1,286.30 an ounce. Goldcorp gained 61¢ to $25.90.
Kinross Gold Corp. reported a big drop in third-quarter net earnings amid falling gold prices and higher production costs. Kinross said net income fell to US$49.9million or 4¢ per share in the three months ended Sept. 30. Adjusted earnings were $54.4-million or 5¢ per share, in line with analyst estimates and its shares rose 20¢ cents to $5.40.
The energy sector was ahead 0.85%. Early gains in oil moderated after U.S. Energy Department data for last week showed that crude supplies rose by 2.6 million barrels against an expected increase of 1.8 million barrels and December crude on the New York Mercantile Exchange was down 12¢ to US$93.76 a barrel. Canadian Natural resources advanced 83¢ to $33.11.