Traders to focus on heavy slate of earnings news, U.S. economic growth data

TORONTO – The Toronto stock market could find some lift from earnings news this week as the second quarter reporting season starts to move into high gear.

Traders will gauge the health of Corporate Canada from companies across the resource, industrial and consumer sectors, including both of Canada’s major railways, grocer Loblaw Cos. (TSX:L), telecom Rogers Inc. (TSX:RCI.B) and some of the country’s top miners.

The TSX ended last week with a small gain of 0.94 per cent as markets in general got a lift from hopes that central banks will do whatever is necessary to keep a fragile global recovery on the rails. Also, oil prices boosted the resource heavy market as another round of Mideast tensions pushed oil back above US$90 a barrel.

The small advance still left the TSX down 2.77 per cent year to date.

It was a quarter marked by lower commodity prices as oil and metals retreated on worries about slowing economies around the world.

“The commodity prices haven’t been all that great in the past quarter and I’m not expecting barn burner results out of anybody (in the resource sector),” said Colin Cieszynski, market analyst at CMC Markets Canada.

“It wouldn’t surprise me at all if we saw some small disappointments out of the various resource producers, probably just because commodity prices haven’t been all that great.”

The first major report of the week comes down Tuesday night from Suncor Energy (TSX:SU). Its results could be affected by a sharp drop in crude during May and June. Oil fell from US$106 to as low as around the $78 mark as worries grew about a slowing global economy. Still, analysts expect Suncor to turn in earnings per share of 77 cents, more than double the 36-cent showing from a year earlier.

Rogers Communications is also out with results Tuesday. Canada’s largest cable TV operator is expected to hand in earnings per share of 87 cents, up from 80 cents a year earlier. In June, Rogers announced it was cutting 375 jobs, as the wireless, cable and Internet provider cuts costs in the face of lower profits and tougher competition on all fronts.

Canadian National Railway (TSX:CN), Canada’s biggest railroad, is expected to issue earnings per share of $1.44, up from $1.18 a year earlier. Analysts suggest CN could find lift from the drop in fuel prices during the quarter.

Grocer Loblaw Cos. Ltd. also hands in results on Wednesday and expectations are muted.

“The grocery market is extremely competitive,” observed Robert Gorman, chief portfolio strategist TD Waterhouse.

“Right now, I suspect you’re going to see softness in their earnings versus a year ago.”

Loblaw saw its profit drop 22 per cent in the first quarter after incurring a number of costs, including upgrading its technology systems, that will continue to depress its earnings as it revamps operations.

The company is also converting some of its Ontario stores from a conventional format to a discount format. Analysts expect the grocer to hand in earnings per share of 62 cents, five cents less than a year ago.

Teck Resources will deliver quarterly results on Wednesday. Analysts expect the miner to report earnings of 77 cents per share, down sharply from $1.12 a year ago. Copper prices slid sharply during the quarter, down from a high of around US$3.92 a pound to a low of under US$3.40.

Meanwhile, it’s a relatively light week on the economic calendar.

Traders will take in the May reading on retail sales from Statistics Canada. Economists expect sales rose by 0.5 per cent, alongside a rebound in auto sales, hopefully reversing a 0.5 per cent decline in April.

The latest reading on U.S. economic strength comes out Friday. Data is expected to show annualized growth of only 1.7 per cent during the second quarter, reflecting belt-tightening by governments and cautious consumer spending.

Other key data during the week includes new U.S. home sales data for June. Economists expect they rose 0.3 per cent to a seasonally adjusted annual rate of 370,000, up slightly from May when sales jumped 7.6 per cent.

Other data was expected to show U.S. durable goods orders for June increased 0.4 per cent on top of a 1.3 per cent gain for May.