Stock markets higher as Fed delivers on Fed stimulus, ties rates to jobless data

TORONTO – The Toronto stock market was higher Wednesday and commodity prices gained ground as the U.S. Federal Reserve launched another dose of economic stimulus.

The U.S. central bank also tied its record low interest rates to a specific level of unemployment.

The S&P/TSX composite index rose 64.78 points to 12,347.14 while the TSX Venture Exchange was unchanged at 1,183.93.

The Canadian dollar rose 0.19 of a cent to 101.59 cents U.S. after the Fed announced a new bond-buying program to replace one that’s about to expire.

The Fed also said it would keep its key rate at 0.25 of a per cent as long as the jobless rate stays above 6.5 per cent. The Fed had previously committed to keeping the rate unchanged until the end of 2015.

“That is still likely consistent with rates remaining on hold until mid-2015, unless prospects shift materially,” said CIBC World Markets senior economist Peter Buchanan.

The Dow Jones industrials were 62.01 points higher at 13,310.45, while the Nasdaq was up 9.78 points at 3,032.08. The S&P 500 index rose 9.27 points to 1,437.11.

The Fed’s latest stimulus program involves spending US$45 billion a month on Treasury securities. It will complement an existing program where the Fed buys mortgage backed securities to the tune of $40 billion a month.

The central bank has launched three rounds of quantitative easing since the financial crisis hit in 2008 and they have been widely credited with strengthening financial markets.

Hopes remained high for a resolution to the so-called fiscal cliff, an end-of-year deadline when automatic spending cuts and tax increases are set to take place. With economic growth already weak, the worry is that the two moves would send the U.S. back into recession, sending shockwaves around the world.

Gold stocks led advancers in Toronto, up 1.35 per cent as bullion prices jumped on heightened inflation concerns after the Fed announcement. February bullion on the New York Mercantile Exchange gained $12.60 to US$1,722.20 an ounce. Barrick Gold Corp. (TSX:ABX) climbed 82 cents to C$34.36 while Goldcorp Inc. (TSX:G) improved by 87 cents to $37.45.

The tech sector also strengthened, led by Research In Motion Ltd. (TSX:RIM), which gained 55 cents or 4.43 per cent to $12.97.

The gain was on top of a 5.8 per cent gain Tuesday after the BlackBerry maker said it has released the “gold” build of its developer tool kit, which contains all the final elements needed to create apps for the coming BlackBerry 10 operating system.

The utilities group was also supportive, up 0.5 per cent as Just Energy Group (TSX:JE) ran ahead 57 cents to $9.90.

The TSX was also lifted by a 0.44 per cent gain in financials as Royal Bank (TSX:RY) climbed 41 cents to $59.28.

The metals and mining sector gained one per cent while copper prices lost early momentum and the March contract on the Nymex was up two cents at US$3.70 a pound. Turquoise Hill Resources (TSX:TRQ) was up 35 cents at C$7.70, while Lundin Mining (TSX:LUN) rose 16 cents to $5.16.

The energy sector was off 0.05 per cent as the January crude contract was up $1.31 to US$87.10 a barrel after OPEC oil ministers said at their meeting Wednesday that they would stick to current daily output targets of 30 million barrels.

Prices held up despite data which showed an unexpected increase in crude supplies last week, along with a bigger-than-expected jump in gasoline inventories. Crude supplies rose by 800,000 barrels instead of an expected 2.5 million-barrel decline. Gasoline supplies climbed by five million barrels, about twice the amount forecast.

Cenovus Energy Inc. (TSX:CVE) fell 72 cents to $33.21 after it said this year’s cash flow is now forecast to come in lower than previously anticipated because of lower crude prices, longer than expected maintenance downtime at U.S. refineries and a one-time cash tax expense. Cash flow is expected to be $3.7 billion, missing the range of $3.9 billion to $4.1 billion Cenovus forecast in October.

The telecom sector was the leading decliner with BCE Inc. shares (TSX:BCE) down 41 cents at $42.54 after subsidiary Bell Canada said it plans to make a $750-million payment toward its defined benefit pension plan.

Canadian National Railway Co. (TSX:CNR) shares dipped five cents to $90.31 after Bill Gates increased his overall stake in to about 12 per cent. Cascade Investment LLC, a company owned by the founder of tech giant Microsoft, has acquired an additional 13,670 CN shares for $1.25 million.