TSX up in wake of Fed taper decision; gold stocks drag, bullion at 3-year low

TORONTO – The Toronto stock market closed higher Thursday, a day after markets responded enthusiastically to the U.S. Federal Reserve’s decision to modestly cut back on a key stimulus program. The Fed also emphasized that short-term rates aren’t going up any time soon.

The S&P/TSX composite index gained 57.47 points to 13,392.2 following a 155-point jump Wednesday, with gains Thursday limited by the gold sector as precious metal stocks added to the steep declines chalked up this year while bullion closed at a three-year low.

The Fed said Wednesday that it was cutting its US$85 billion of monthly bond purchases by $10 billion starting in January. Further cuts will depend on economic data, particularly jobless levels and inflation.

The Canadian dollar erased early losses and closed up 0.21 of a cent at 93.76 cents US. A stronger American currency had pushed the loonie down almost three-quarters of a US cent on Wednesday.

U.S. indexes were mixed in the wake of big gains Wednesday, with the Dow Jones industrials up 11.11 points to 16,179.08 after charging ahead almost 300 points the previous session.

“It’s a good news story,” said Sadiq Adatia, chief investment officer of Sun Life Global Investment, who thinks the Fed removed a major impediment to further market gains.

“They’ve actually opened the door for the next couple of months for us to really have no uncertainty about what’s going on in the market. And I think that provides some good opportunities for people to feel more comfortable about the markets.”

The Nasdaq declined 11.93 points to 4,058.13 and the S&P 500 index was 1.05 points lower at 1,809.6.

The Fed has been using quantitative easing since the financial crises of 2008, with the latest instalment, which began in September 2012, having kept long-term rates low and supporting strong gains on equity markets.

The TSX was weighed down by a drop of almost two per cent in the much-battered gold sector as bullion prices resumed sliding after the Fed move.

QE had supported gold prices because of inflationary fears. But inflation is tame in many countries and data out earlier this week showed the U.S. consumer price index rising at an annual rate of only 1.2 per cent, significantly below the Fed’s inflation target of two per cent.

The February gold contract on the New York Mercantile Exchange fell $41.40 to US$1,193.60 an ounce, its lowest close since Aug. 3, 2010. Gold prices are down 29 per cent so far this year while the TSX Global Gold sector has tumbled about 50 per cent. On Thursday, Barrick Gold (TSX:ABX) shed 40 cents to C$17.68 and Goldcorp (TSX:G) faded 36 cents to $7.92.

Elsewhere on commodity markets, the base metals component moved 2.8 per cent higher even as March copper slipped two cents to US$3.30 a pound. Teck Resources (TSX:TCK.B) climbed 92 cents to C$25.66 while HudBay Mineralos (TSX:HBM) ran up 36 cents to $7.92.

January crude gained 97 cents to US$98.77 a barrel and the energy sector gained 0.74 per cent. Canadian Natural Resources (TSX:CNQ) was ahead 60 cents at C$35.02.

Tech stocks also lifted the TSX with CGI Group (TSX:GIB.A) ahead 94 cents to $37.99. BlackBerry (TSX:BB) rose 20 cents to $6.67 a day before the smartphone maker releases its latest earnings.

Financials put in a strong showing, particularly insurers with Manulife Financial (TSX:MFC) ahead 52 cents to $20.75 after earlier hitting a fresh 52-week high of $20.79. Sun Life Financial (TSX:SLF) climbed 54 cents to $36.97.

A major decliner was auto parts company Martinrea International (TSX:MRE), which warned that fourth-quarter net earnings will likely fall short of previous guidance. Among other things, it pointed to an issue with the financial reporting of one of its Canadian plants. It said “it appears at this point that the plant misreported its financial statements over a number of years dating back to 2005.”

Its stock fell $1.94 or 20.59 per cent to $7.48.

In other corporate news, retailer Target says that about 40 million credit and debit card accounts may have been affected by a data breach. The chain, which has 1,797 U.S. stores and 124 in Canada, said that customers who made purchases using their cards at its U.S. stores between Nov. 27 and Dec. 15 may have been exposed. Target shares declined $1.40 to $62.15.

Meanwhile, after markets closed, a joint review panel gave the thumbs up to Enbridge Inc.’s proposed Northern Gateway pipeline that would connect the Alberta oilsands to tankers on the B.C. coast.

However, the panel attached 209 conditions to the controversial $6-billion project, which pitted Calgary-based Enbridge (TSX:ENB) against environmental groups and several First Nations. The final decision rests with the federal government, which has roughly six months to respond to the report.

On the Toronto Stock Exchange, Enbridge shares closed up 48 cents at $45.33.