Stock markets rise, traders balance strong jobs data with Fed stimulus concerns

TORONTO – The Toronto stock market closed sharply higher Friday as a much stronger than expected American employment report encouraged buyers while at the same time raising concerns that the U.S. Federal Reserve could be set to unwind a key stimulus program.

The S&P/TSX composite index gained 84.13 points to 13,378.33 as investors also took in Canadian jobs numbers that breezed past expectations.

The loonie was down 0.15 of a cent to 95.44 cents US as the Canadian economy created 13,200 jobs last month, about 2,000 more than expected, while the jobless rate held steady at 6.9 per cent.

The American dollar was sharply higher after data showed that the U.S. economy cranked out 204,000 jobs, far above the approximately 120,000 reading that had been expected.

The U.S. jobless rate ticked up 0.1 of a point to 7.3 per cent, but that reflected the huge temporary layoffs that resulted from the partial U.S. government shutdown in early October.

U.S. indexes also took off as traders balanced the latest indication of an improving economy with rising concerns that the Federal Reserve will think the economy is strengthening to a point where it can start winding up its US$85 billion of monthly bond purchases. That stimulus program has supported a strong rally on markets.

“If it was a weak (employment) number, then the market would have discounted it because of the government shutdown,” said Philip Petursson, managing director, portfolio advisory group, Manulife Asset Management.

“But an excessively large print in spite of a government shutdown like we had just changes the belief or odds of tapering being delayed to March. And now, it’s maybe they can do it sooner.”

The Dow Jones industrials surged 167.8 points to 15,761.78, the Nasdaq climbed 61.9 points to 3,919.23 and the S&P 500 index was ahead 23.46 points to 1,770.61.

The strong employment data came out a day after a better than expected reading on third-quarter U.S. economic growth also raised worries that the Fed could start to taper as soon as the end of December.

However, investors also balanced the jobs data with another report showing declining consumer confidence.

The University of Michigan’s consumer-sentiment index fell to 72 in November, the lowest level in nearly two years and below expectations for a reading of 75.

On the earnings front, Air Canada (TSX:AC.B) posted adjusted net income of $365 million, an increase of nearly 60 per cent compared with that same time last year. The adjusted earnings amounted to $1.29 per share, which was 26 cents per share above analyst estimates. Its shares jumped 40 cents or 7.16 per cent to $5.99 after hitting a fresh, 52-week high of $6.19 — the kind of numbers not seen since before the 2008 recession.

Telus Corp. (TSX:T) rose 62 cents to $36.90 as the telecom reported its adjusted profit jumped to $365 million in the third quarter, up 13 per cent from a year earlier. On a per-share basis, Telus had 58 cents of adjusted earnings, two cents better than the consensus estimate.

The energy sector led advancers, ahead 1.37 per cent while December crude on the New York Mercantile Exchange edged up 40 cents to US$94.60 a barrel. Canadian Natural Resources (TSX:CNQ) climbed 42 cents to C$33.03.

There was also major acquisition activity in the resource sector as Talisman Energy Inc. (TSX:TLM) reached a deal to sell its interests in two B.C. natural gas partnerships for $1.5 billion in cash. The buyer is Progress Energy Corp., a formerly independent Canadian company that is now a subsidiary of Malaysia’s state-owned Petronas. Its shares ran up 20 cents to $12.42 .

The tech sector was also ahead, with BlackBerry shares up seven cents to $6.84 a day after Fairfax Financial (TSX:FFH) revealed the names of the five other investors in its US$1-billion financing of the smartphone maker. Mackenzie Financial Corp., Canso Investment Counsel Ltd., Markel Corp., Brookfield Asset Management Inc. and Qatar Holding LLC have also contributed.

Financials rose almost one per cent as Manulife Financial (TSX:MFC) gained 50 cents to $19.72, 13 cents short of a new 52-week high of $19.85 registered earlier in the session, and Royal Bank (TSX:RY) improved by 49 cents to $70.31.

The gold sector shook off early losses to move up about 0.65 per cent even as bullion prices fell sharply on speculation the Fed could start winding up bond purchases. The December bullion contract plunged $23.90 to US$1,284.60 an ounce.

The interest rate sensitive utilities sector was the biggest drag, down 1.3 per cent as U.S. bond yields moved up sharply on the Fed speculation with the key U.S. 10-year Treasury up 0.16 of a point from Thursday at 2.76 per cent. Atlantic Power (TSX:ATP) tumbled 49 cents, or 10.79 per cent, to $4.05.

The metals and mining sector fell 0.3 per cent with December copper up a penny at US$3.25 a pound. HudBay Minerals (TSX:HBM) slipped 32 cents to C$8.42.