Jan. 20, 2010 (Baystreet.ca) --
Canadian stocks struggled out of the gate on Wednesday, as commodity prices turned sharply lower on a stronger US dollar and speculation China is preparing to turn off its lending spigot.
The S&P/TSX Composite Index fell 79.99 points early on to register at 11,683.43.
However, Bay Street may take a bit of comfort knowing that economic support measures will remain in place for the foreseeable future. This morning's tame inflation data cemented expectations that the Bank of Canada will hold steady on record low interest rates through mid-2010.
The main index had managed to end marginally higher in the previous session mainly supported by upsurges in gold stocks, which have moved along with the prices of gold. The Index added a marginal 12.88 points to 11,763.42 on Tuesday.
Statistics Canada said today that consumer price index rose 1.3% in the 12 months to December, after rising 1% in the previous month. The rise was primarily due to gasoline prices, which rose 25.6% year over year in December.
The agency noted that December's on-year increase was the largest since February 2009. The inflation came in at less than the widely expected rise of 1.6% and stayed below the central bank's target.
Yesterday, Bank of Canada announced its decision to keep the benchmark interest rate unchanged at 0.25% and hinted that the rate is likely to remain at the current level until the end of the second quarter of 2010.
Meanwhile, the price of crude oil slipped back, as did bullion prices.
Financial stocks may be under pressure after Bank of America, the largest bank in the U.S., reported a wider-than-expected quarterly loss of $5.2 billion, just after a day Citibank announced a similar not-so-encouraging financial numbers.
In corporate news, full services telecommunications provider Manitoba Telecom Services said it will make a one-time payment of $43 million in a pension law suit and noted this could take up the total one-time future payment to $100 million.
Petroleum and natural gas explorer Canadian Superior Energy said it had raised $59.5 from a non-brokered private placement.
Mineral explorer Trelawney Mining and Exploration announced that it has entered into a mining claim acquisition agreement, which empowers the company the right to acquire a 70% interest in certain patented and unpatented mining claims located in Lizar Township, Ontario.
Information technology provider MacDonald Dettwiler and Associates said it has received a $2.4-million contract from Orbital Sciences Corp. The contract also contains an option to purchase additional units for follow-on operational missions worth at least $4 million.
Wireless network service provider International Datacasting Corp. announced that it has been awarded a $5.3-million contract by National Public Radio.
Oil and natural gas producer Monterey Exploration said it would spend $15 million in capital expenditure in first half 2010 and noted that its production is expected to decline modestly and average 1,600 to 1,700 barrels of oil equivalent per day in the same period.
Wireless network service provider Unique Broadband Systems reported first-quarter net loss and comprehensive loss of $0.02 per share, compared to a net income of $0.01 per share in the prior-year quarter.
Communications service provider Look Communications reported first quarter net loss and comprehensive loss of $0.02 per share, compared to an income of $0.02 per share in the year-ago period.
Archangel Diamond Corp. announced the resignation of Tom Beardmore-Gray as President and Chief Executive Officer, effective January 15.
Silver mining company Silver Standard Resources announced that Robert Quartermain has resigned as President and CEO, effective January 19.
In other economic news, Statistics Canada said country's manufacturing sales inched by a less-than-expected 0.1% in November, mainly pressured by a 4.3% slide in transportation industry.
The Canadian dollar plummeted 1.69 cents to 95.37 cents U.S.
ON BAYSTREET
All but two of the 14 TSX subgroups started the day lower. Metals and mining stocks wobbled 2.2%, while global base metals struggled 2.1%. Gold stocks eased 1.9%.
The two gainers were health-care stocks, ahead 1.6%, and consumer discretionaries, nosing up 0.1%.
The TSX Venture Exchange gave back 11.28 points to 1,601.58, while the Nasdaq Canada index subtracted 10.65 points to 718.06.
ON WALLSTREET
In New York, struggled Wednesday as investors had a sour response to IBM's better-than-expected results and an encouraging report on the housing market, following the previous session's rally.
The Dow Jones Industrials took off 123.11 points, or 1.2%, to begin the session at 10,602.32. The S&P 500 stepped back 11.38 points to 1.138.85, and the Nasdaq let go of 20.84 points to 2,299.56.
Stocks rallied Tuesday, with IBM leading a tech charge ahead of its quarterly results, released after the close of trade. The Dow and the S&P 500 ended at fresh 15-month highs and the Nasdaq ended at a new 16-month high.
But the rally proved short-lived, with stocks on the slide Wednesday.
IBM reported higher quarterly sales and earnings late Tuesday that topped estimates. But investors took a "sell the news" approach and sent shares lower Wednesday morning.
The company known as "Big Blue" said it earned $3.59 U.S. per share versus $3.28 U.S. a year earlier. Analysts surveyed by Thomson Reuters thought it would earn $3.47 U.S. per share. Sales inched up to $27.23 billion U.S. from $27 billion U.S. in the prior-year versus forecasts for a drop to $26.96 billion U.S.
Looking forward, IBM said it expects earnings per share of at least $11 U.S. for 2010.
Bank of America reported a fourth-quarter loss of $5.2 billion U.S. Wednesday morning, worse than the $3.9-billion-U.S. loss forecast by analysts. The bank said that repaying funds to the Troubled Asset Relief Program hurt its bottom line by $4 billion U.S.. But the stock rose in morning trading.
Morgan Stanley reported a quarterly profit of $413 million U.S., bouncing back from its $10.5-billion U.S. loss a year earlier. The stock fell 1.7% in morning activity.
Wells Fargo reported a surprise profit of eight cents U.S. per share, trumping Wall Street's expectations for a loss. That stock was little changed in the morning.
Investors will also be assessing the impact of Tuesday's victory for Republicans in the Massachusetts Senate race.
President Obama's plan to overhaul health care could be derailed following the upset victory, with House Democrats largely rejecting the idea of passing the Senate health care bill.
The government released reports on housing starts and building permits, with mixed results.
Building permits soared to an annual rate of 653,000 units in December, according to the Census Bureau. This was much higher than the expected rate of 580,000, according to a consensus of economists surveyed by Briefing.com. That's compared to a revised figure of 589,000 for the prior month.
Housing starts dropped to an annual rate of 557,000 units in December, according to the Census Bureau. Briefing.com consensus had expected at an annual rate of 575,000 for December, according to the Briefing.com consensus. That's compared to the revised figure of 580,000 in November.
The Producer Price Index, a reading of inflation at the wholesale level, rose 0.2% in December, said the Bureau of Labor Statistics. The PPI was expected to be flat for December, according to Briefing.com consensus, after gaining 1.8% the prior month.
The core PPI, which excludes volatile food and energy prices, was flat, the government said.
The Federal Housing Administration is also due to announce stricter standards for getting a government-backed mortgage loan on Wednesday.
Treasury prices jumped, lowering the yield on the 10-year note to 3.65% from 3.70% late Tuesday. Treasury prices and yields move in opposite directions.
The price of a barrel of oil fell $1.46 to $77.56 U.S.
Gold prices tumbled $19 to $1,121 U.S.
