TSX down, economic worries trump strong bank earnings, consumer confidence data

TORONTO – The Toronto stock market closed lower Friday with buyers inclined to do little at the end of a negative week amid falling commodity prices and a strong earnings report from an American banking giant.

The S&P/TSX composite index eased 31.91 points to 12,202.04 while the TSX Venture Exchange was 7.13 points lower at 1,292.81.

The Canadian dollar closed down 0.07 of a cent at 102.11 cents US.

New York markets were also listless after JPMorgan handed in a record quarterly profit of US$5.7 billion, up 34 per cent from a year ago as the bank set aside less money for bad loans. Earnings were $1.40 per share, far exceeding the $1.21 predicted by analysts polled by FactSet.

Revenue rose six per cent to $25.1 billion, beating expectations of $24.4 billion.

JPMorgan stock dropped 48 cents to US$41.62. However, the stock has already come back strongly from a low of $31 in early June after the bank announced a surprise trading loss that ballooned to $6 billion.

Indexes also failed to find support from a strong consumer confidence reading.

The Dow Jones industrials added 2.46 points to 13,328.85 as the University of Michigan’s index for October came in at 83.1, up from 78.3 in September.

The Nasdaq composite index shed 5.3 points to 3,044.11, while the S&P 500 index was down 4.25 points at 1,428.59.

Earnings expectations are low for the third quarter — many companies report results next week —as the eurozone debt crisis continues to take a toll on economies in Europe, affecting the results of multinationals. The malaise has also spread to developing economies such as China.

Analysts expect a 2.1 per cent year-over-year decline in S&P 500 operating earnings, which would be the first year-over-year drop since the recession that followed the 2008 financial collapse.

Traders also took in better-than-expected earnings from U.S. bank Wells Fargo. It posted third-quarter earnings per share of 88 cents, beating estimates by a penny. Revenue rose eight per cent to $21.21 billion, which was slightly lower than analysts’ estimates and its shares fell 93 cents to US$34.25.

The TSX ended the week down 217 points or 1.74 per cent in the wake of a gloomy assessment of the global economy by the International Monetary Fund, which reduced its growth forecast for the world economy to 3.3 per cent this year from its previous estimate of 3.5 per cent.

Still, the TSX is up about 7.5 per cent from the market lows of early June, largely because of a commitment from European Central Bank president Mario Draghi to do whatever it takes to preserve the monetary union and another round of quantitative easing by the U.S. Federal Reserve.

“There had to be a let down and we are getting it,” said Pat McHugh, senior managing director and Canadian equities strategist at Manulife Asset Management.

“This move from the time Draghi made his comments (in early August) to now has all been policy driven, it hasn’t been earnings driven, it hasn’t been fundamentally driven. For the near term, I’m afraid I don’t see any triggers that will move this market.”

The gold sector led decliners, down about 1.3 per cent as December bullion was off $10.90 to US$1,759.70 an ounce. On the TSX, Barrick Gold Corp. (TSX:ABX) faded 73 cents to C$38.31.

The base metals sector drifted down 0.45 per cent as metal prices backed off with December copper down five cents to US$3.70 a pound. Teck Resources (TSX:TCK.B) dropped 50 cents to C$29.89.

The energy component was slightly higher as the November crude contact on the New York Mercantile Exchange shed early gains to move down 21 cents to US$91.86 a barrel. Prices have advanced this past week on fears that the conflict in Syria could widen and threaten oil shipments from the Mideast. Canadian Natural Resources (TSX:CNQ) gained 24 cents to C$30.25.

Tech stocks led advancers with MacDonald & Dettwiler and Associates (TSX:MDA) ahead 82 cents to $50.72.

It was a light day on the economic calendar.

In the U.S., a second month of sharp gains in gasoline costs drove wholesale prices higher in September. But outside of the surge in energy, prices were well contained. Wholesale prices rose 1.1 per cent in September following a 1.7 per cent gain in August.