U.s. funding crisis weighs on markets
TORON TO • The Toronto stock market closed flat on Friday, capping a session where traders opted for caution going into the weekend amid the possibility of a U.S. government shutdown early next week.
The S&P/TSX composite index inched up 2.46 points to 12,844.08 as BlackBerry turned in a huge quarterly loss and dismal sales figures.
BlackBerry lost US$965-million in the second quarter as revenue plunged 49% from the previous quarter and 45% from a year earlier to US$1.6-billion, amid very poor sales of its new smartphones. However, the results were in line with company estimates issued last week when BlackBerry announced 4,500 jobs would be cut from its global workforce.
BlackBerry shares gained 6¢ to $8.28 on the Toronto Stock Exchange, while in the U.S., BlackBerry sharesadded US8¢ to US$8.03 on the Nasdaq market.
The Canadian dollar turned higher amid rising commodity prices, up 0.09 of a cent at US97.06¢.
There was skepticism that Congress can pass a funding bill to keep the U.S. government operating after Oct. 1, when its new fiscal year starts. Also, the U.S. borrowing limit needs to be raised before Oct. 17.
But Republicans want to tie the moves to defunding the Affordable Care Act, otherwise known as Obamacare, and slash spending.
“They can’t afford to mess around on this,” said Wes Mills, chief investment officer at Scotia Asset Management PM Advisor Services. “They’re digging in their heels because they’re tying the Obamacare passage to the debt ceiling. And ultimately, if they push too hard on that, it’s going to rattle markets big time.”
Shortly before the close, President Barack Obama said the threat of a shutdown is probably already having a negative effect on the economy.
U.S. indexes were negative as investors digested a report showing higher consumer spending and income growth in August — and other data showing slowing consumer confidence in the United States.
The Dow Jones industrials dropped 70.06 points to 15,258.24, the Nasdaq was 5.84 points lower to 3781.59 and the S&P 500 index was down 6.92 points to 1691.75.
The U.S. Commerce Department said consumer spending rose 0.3% in August. That’s up from a 0.2% gain in July. Income rose 0.4% in August, the best gain since February and up from a 0.2% July increase.
The spending and income data is closely watched because consumer spending drives 70% of U.S. economic activity.
The consumer staples sector was the biggest gainer, up 0.7% with drugstore chain Jean Coutu Group (PJC) Inc. ahead 32¢ to $18.29.
The energy sector was up slightly with the November crude contract on the New York Mercantile Exchange down US16¢ to US$102.87 a barrel.
The gold sector also edged higher as nervousness about the U.S. budget fight sent December bullion up US$15.10 to US$1,339.20 an ounce. The base metals sector was the biggest decliner, down 1.6% despite December copper on the NYMEX rising US2¢ to US$3.33 a pound.