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The Canadian Press - ONLINE EDITION

TSX ekes out modest gain as jittery investors counter upbeat earnings

By: Kristine Owram, The Canadian Press

29/07/2010 3:54 PM | Comments: 0

TORONTO - The Toronto stock market eked out a modest gain Thursday as investor nervousness about the pace of economic recovery countered a batch of upbeat earnings from key resource companies.

The S&P/TSX composite index closed 32.01 points higher at 11,728.64 following a volatile trading day.

Suncor Energy Inc. (TSX:SU), Imperial Oil (TSX:IMO), Barrick Gold Corp. (TSX:ABX), Goldcorp Inc. (TSX:G), and Potash Corp. of Saskatchewan Inc. (TSX:POT) all reported big jumps in second-quarter income and revenue.

However, investors were hesitant to jump into the market with both feet in advance of reports on Canadian and U.S. gross domestic product data, due out Friday, and next week's employment numbers for both countries.

"It's not that (investors) are completely doubting the recovery, but they do need to see more support from the macro data to get them to feel more comfortable about future earnings expectations," said Gareth Watson, director of the Canadian Equities Portfolio Advisory Group at ScotiaMcLeod.

"What matters in equity markets is not the past three months but the next 12."

The Toronto energy sector slipped 0.1 per cent even after Canada's biggest oil producer reported a huge reversal in its second-quarter fortunes. Suncor Energy earned $480 million compared with a loss of $51 million a year ago. Shares in Suncor added 87 cents or 2.6 per cent to $33.91.

The September crude contract on the New York Mercantile Exchange gained $1.37 to close at US$78.36 a barrel amid better-than-expected earnings on both sides of the border.

Gold stocks added 0.3 per cent after Canada's two largest gold companies reported big gains in quarterly profits.

Barrick Gold, the world's largest gold producer, raised its dividend 20 per cent as it reported a record second-quarter profit of US$783 million, up 59 per cent from a year ago. Shares in Barrick gained 38 cents to C$42.

And Goldcorp reported a second-quarter profit of US$826.7 million, boosted by the sale of its Escobal silver deposit in Guatemala. Shares in the company slipped 26 cents to $40.19.

The August bullion contract gained $8 to close at US$1,168.40 an ounce.

The financial sector added 0.5 per cent on the strength of insurance stocks, which jumped following reports that upcoming changes to capital rules for life insurers will only apply to products sold in the future. Shares in Manulife Financial (TSX:MFC) climbed 67 cents or 4.3 per cent to C$16.37.

The base metals sector gained 0.1 per cent as the September copper contract climbed 4.45 cents to US$3.29 a pound. Shares in HudBay Minerals Inc. (TSX:HBM) added 14 cents to C$12.73.

The loonie was up 0.22 of a cent to 96.51 cents U.S., while the TSX Venture Exchange added 11.66 points to 1,422.28.

Wall Street closed lower after James Bullard, president of the Federal Reserve Bank of St. Louis, warned that the United States could tip into a bout of deflation if the economy weakens. Deflation is a widespread and prolonged drop in wages, prices of goods and values of homes and stocks.

The Dow Jones industrial average fell 30.72 points to 10,467.16, while the Nasdaq composite index was down 12.87 points at 2,251.69. The S&P 500 index fell 4.60 points to 1,101.53.

A slightly bigger-than-expected drop in U.S. unemployment claims wasn't enough to offset investor caution, even though it signals the pace of recovery is picking up again.

The U.S. Labour Department said initial jobless claims fell to 457,000 last week. That's better than the 459,000 forecast by economists.

Thursday was a busy day for Canadian companies reporting second-quarter results.

Potash Corp. of Saskatchewan said it earned $472 million, more than double its year-ago profit, and the second-highest second-quarter total in the company's history. It also raised its profit outlook for the year. Shares in Potash Corp. gained $4.69 or 4.6 per cent to C$106.39.

Cenovus Energy Inc. (TSX:CVE), the integrated oil company spun off last year by Encana Corp. (TSX:ECA), said it earned $172 million in the second quarter, up 7.5 per cent, but its operating earnings missed analysts' expectations. Shares in Cenovus lost $1.43 or 4.8 per cent to $28.54.

Information services provider Thomson Reuters Corp. (TSX:TRI) said profit dropped eight per cent to US$290 million while revenue slipped two per cent. Shares in Thomson Reuters lost 74 cents to $38.96.

Forest products company Tembec Inc. (TSX:TMB) reversed a year-ago loss, earning $59 million as sales increased nearly 35 per cent. The company's stock price added three cents to $2.17.

Natural gas shipper TransCanada Corp. (TSX:TRP) reported lower second-quarter earnings because of measures it took to shield itself from interest-rate and foreign-exchange swings. The company said it earned $295 million, down six per cent from a year earlier. Shares in the company slipped 16 cents to $36.10.

And Imperial Oil Ltd. (TSX:IMO) said it more than doubled its second-quarter profit to $517 million as revenue increased 16 per cent. Imperial Oil's stock price fell 48 cents to $40.18.

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