Gold stocks lead TSX to small gain, Royal Bank, CIBC post higher profits

TORONTO – The TSX closed slightly higher Thursday with strength coming from mining stocks as the market gave a tepid reception to higher profits at Royal Bank (TSX:RY) and CIBC (TSX:CM).

The S&P/TSX composite index was up 13.95 points to 12,746.55 as Royal Bank posted $1.9 billion of net income in the second quarter, up 26 per cent from a year earlier. The profit amounted to $1.27 share while adjusted diluted EPS was $1.31, which met a Thomson Reuters estimate but missed a Bloomberg estimate by a penny. RBC shares lost $1.14 to $62.84.

CIBC, which increased its quarterly dividend by two cents to 96 cents per share, had a second-quarter profit of $876 million, up eight per cent from a year ago. Its net income and adjusted net income both came in at $2.12 per share and beat the consensus estimate.

CIBC also said it is working on alternatives in case it does not renew its Aeroplan credit card agreement with Aimia (TSX:AIM), which is set to expire at the end of the year.

President and chief executive Gerry McCaughey didn’t rule out renewing the existing contract with the company formerly known as Aeroplan, but said having an alternative card would benefit the bank’s clients and shareholders.

CIBC shares dropped $1.21 to $79.22 while Aimia slipped 20 cents to $14.98.

CIBC and Royal Bank were the last of Canada’s big banks to report their second-quarter results.

“In general, I think our banks turned in adequate performance, (although there is) some concern over middling growth in Canada,” said Chris King, portfolio manager at Morgan, Meighen and Associates.

“They reflect the fact that they have good levels of capital so there could be some share repurchase activity in the months ahead which is supportive for earnings growth and share price appreciation.”

The Canadian dollar was ahead 0.49 of a cent to 97.09 cents US amid rising prices for gold and copper.

U.S. markets were positive amid slightly weaker than expected U.S. economic growth in the first quarter, a rise in jobless insurance claims and an indication of further strength in home sales in the coming months.

However, indexes closed well off the best levels of the session and the Dow Jones industrials came down from a gain of about 100 points to close up 21.73 points to 15,324.53, while the Nasdaq gained 23.78 points to 3,491.3. The S&P 500 index rose 6.05 points to 1,654.41.

A second reading on U.S. gross domestic product for the first quarter showed GDP coming in at an annualized rate of 2.4 per cent, a bit below the initial reading of a 2.5 per cent gain. But the showing was still a marked improvement from the 0.4 per cent gain in the final quarter of 2012.

And the number of Americans seeking unemployment aid rose 10,000 last week to a seasonally adjusted 354,000, a sign layoffs have increased. The U.S. Labor Department also said the four-week average, a less volatile measure, increased 6,750 to 347,250, the third straight gain. The average had fallen to a five-year low of 338,000 earlier this month.

The reports reassured investors that the Federal Reserve won’t pull back on its economic stimulus any time soon, meaning the central bank will keep up its $85 billion in monthly bond purchases.

“The big worry that’s been hitting the market lately, that the Fed might step back prematurely, might be fading a little today on the idea that the economy does need a bit more support,” said Jeff Kleintop, chief market strategist at LPL Financial in New York.

There was some positive news from the U.S. housing front as the National Association of Realtors says its seasonally adjusted index for pending U.S. home sales rose 0.3 per cent to 106, the highest since April 2010, when a homebuyer tax credit inflated sales. Signed contracts have jumped 10.3 per cent in the past 12 months.

The gold sector led TSX advancers, up almost five per cent while August gold was up $20.20 to US$1,412 an ounce. Barrick Gold Corp. (TSX:ABX) jumped $1.38 to C$21.91 while Goldcorp Inc. (TSX:G) ran ahead $1.46 to $30.16.

The base metals sector rose 1.25 per cent as copper futures were ahead two cents at US$3.32 a pound. Teck Resources (TSX:TCK.B) advanced 69 cents to C$28.59.

The telecom group led decliners, down one per cent with Telus Corp. (TSX:T) down 67 cents to $36.42.

Most bank stocks were lower, taking the financial sector down 0.4 per cent as Bank of Montreal (TSX:BMO) shed 66 cents to $61.84.

The energy sector was slightly lower as oil prices erased early losses and the July crude contract on the New York Mercantile Exchange gained 48 cents to US$93.61 a barrel.

Prices improved after data from the U.S. Energy Department’s Energy Information Administration said stockpiles increased by three million barrels last week. The American Petroleum Institute had reported a bigger, 4.4 million-barrel increase in inventories late Wednesday.

Canadian Natural Resources (TSX:CNQ) was down 14 cents to C$31.94.