MARKETS MIXED AFTER YELLEN COMMENTS
TORONTO • North American markets were mixed as investors digested U.S. Federal Reserve chair Janet Yellen’s hawkish comments late Thursday about the American economy.
The S&P/TSX composite index closed 39.90 points higher at 13,378.57, while the loonie was up 0.01 to US75.10 cents.
In New York, the Dow Jones industrial average advanced 113.35 points to 16,314.67, while the broader S&P 500 index gave back 0.90 points to 1,931.34. The Nasdaq fell 47.98 points to 4,686.50.
Yellen said in a speech after markets closed on Thursday that the U.S. economy is strengthening and that global economic weakness won’t prevent the central bank from hiking interest rates before the year’s end.
The Fed’s benchmark interest rate has remained at record low levels since the 2008 global financial crisis.
“I think the market took it as positive,” Ian Nakamoto, director of research at 3Macs, said in relation to Yellen’s comments.
Usually, central banks raise rates to cool down breakneck pace in the economy that threatens to send inflation soaring.
“This is a bit of the opposite, where the initial hike of interest rates from 0 to 25 basis points to 25 to 50 basis points is being viewed as a signal that everything is fine in the U.S., and that the economy can withstand a small increase in interest rates,” Nakamoto said.
On the commodity markets, the November crude oil contract was up 79 cents at US$45.70 a barrel, sending the energy sector of the Toronto stock market higher, while the November contract for natural gas was down four cents at US$2.63.
The December gold contract fell $8.20 to US$1,145.60 an ounce and the December copper contract slipped two cents to US$2.28 per pound. The gold and metals and mining sectors of the TSX both declined more than one per cent.
In the coming weeks, investors will be turning their attention to earnings reports out of the U.S., Nakamoto said.
“October overall tends to be a pretty good month,” Nakamoto said.
“Expectations are pretty low so companies should be able to meet and exceed their earnings expectations.”
Shares in Nike Inc. soared 8.89 per cent, or $10.21, to close at US$125 after the company reported better than expected sales, driven by a jump in revenue from China.
BlackBerry Ltd. shares fell 7.7 per cent to $8.64, after the smartphone maker reported weaker-than-expected quarterly results on Friday.
A 4.9 per cent tumble in the health-care sector, precipitated by Valeant Pharmaceuticals International Inc., was the biggest contributor to the pull back in the TSX’s earlier gains.
Shares of the index superweight sank 4.9 per cent to $265.01.
Valeant’s moves shadowed U.S. biotech shares, which officially entered bear market territory.
The sell-off began on Monday after leading U.S. Democratic presidential candidate Hillary Clinton tweeted her intent to tackle unnecessarily high prices in some drug markets.