TSX to open little changed amid mixed commodities, concerns about U.S. rally

TORONTO – The Toronto stock market likely headed for a flat start to the session Tuesday amid lower commodity prices and concerns that a lengthy U.S. stock rally may be running out of steam.

The Canadian dollar was down 0.03 of a cent to 95.83 cents US as markets also digested a report saying interest rate hikes could be closer than thought. The Organization for Economic Cooperation and Development said the Bank of Canada may need to start hiking its trendsetting interest rate from one per cent within the next year and steadily push it to 2.25 per cent by the end of 2015.

The OECD said the central bank may have to start tightening by late next year in order to avoid a buildup of inflationary pressures as spare economic capacity narrows.

U.S. futures were little changed after key indexes backed off Monday after hitting key technical levels, raising questions about whether American markets are due for their first serious retracement in two years.

The Dow Jones industrial futures slipped three points to 15,935, the Nasdaq futures declined three points to 3,381 and the S&P 500 futures were off three points to 1,785.75.

Investors remained cautious a day after the Dow broke 16,000 and the S&P breached the 1,800 mark — both for the first time. But both indexes closed little changed as the latest highs persuaded investors to take some profits from a rally that has seen both those indexes surge over 20 per cent year to date. The Dow alone has surged about 900 points since early October amid optimism that the Federal Reserve won’t be moving to cut back on its monthly US$85 billion of bond purchases until well into the new year.

The TSX is up about 8.5 per cent for the year so far, dragged down by the mining sector. Most other sectors have put in a solid performance, particularly financials and industrials.

Meanwhile, traders are looking to Wednesday and the release of the minutes from the latest Federal Reserve meeting held late last month for hints about when the Fed might start cutting back on its asset purchases, which have kept bond yields low and encouraged people to buy equities.

The consumer sector was in focus Tuesday as Sears Canada Inc. (TSX:SCC) said that it will pay its shareholders an extraordinary dividend of $5 per share on Dec. 6 — an amount equal to about 30 per cent of the company’s recent stock price.

The retailer also posted a quarterly net loss of $48.8 million or 48 cents per share, mainly due to severance and restructuring costs.

Food company George Weston (TSX:WN) posted earnings ex-items of $1.38 a share, seven cents shy of estimates.

In the U.S., Home Depot Inc. reported net income of $1.35 billion, or 95 cents per share, up from $947 million, or 63 cents per share, a year ago. Analysts expected earnings of 89 cents per share. Revenue rose seven per cent to $19.47 billion from $18.13 billion. Wall Street predicted $19.18 billion.

In other corporate news, Patheon Inc. (TSX:PTI) has received a friendly takeover offer that values the drug company at about US$1.4 billion, more than 50 per cent above its recent market price. The offer of US$9.32 per share cash is coming from a group backed by Patheon’s largest shareholder, U.S. private equity firm JLL Partners.

Commodity prices were mixed with December crude 38 cents lower to US$92.65 a barrel.

December copper edged up a penny to US$3.15 a pound while December bullion climbed $1.60 to US$1,273.90 an ounce.

European bourses were in the red even as a key index of optimism about the German economy rose more than expected in November.

The ZEW index rose to 54.6 points from 52.8 points in October. That is more than the 54.0 expected on average by analysts.

London’s FTSE 100 index lost 0.44 per cent, Frankfurt’s DAX slipped 0.22 per cent while the Paris CAC 40 dropped one per cent.

Earlier in Asia, Japan’s Nikkei 225 stock average closed down 0.3 per cent, China’s Shanghai Composite Index dropped 0.2 per cent, Australia’s S&P/ASX 200 lost 0.6 per cent, Hong Kong’s Hang Seng was little changed and Seoul’s Kospi rose one per cent.