TSX positive, traders eye earnings reports, testimony from Fed chair Yellen

TORONTO – The Toronto stock market closed modestly higher Monday as traders hoped a strong report from the American financial sector indicated another upbeat earnings season from North American corporations.

The S&P/TSX composite index ran up 45.73 points to 15,171.23, but was well off the highs of the session as mining stocks fell alongside sliding prices for copper and gold.

The Canadian dollar rose 0.17 of a cent to 93.33 cents US two days before the Bank of Canada makes its next interest rate announcement.

The Dow Jones industrials closed up 111.61 points to 17,055.42 as Citigroup posted quarterly earnings per share of US$1.24, beating forecasts of $1.06 a share and its stock ran ahead 3.02 per cent to $48.42. The bank also said Monday it will pay US$7 billion to settle an investigation into risky subprime mortgages, the type that helped fuel the financial crisis.

The Nasdaq advanced 24.93 points to 4,440.42 while the S&P 500 index was ahead 9.53 points to 1,977.1.

Elsewhere in the financial group, Bank of America reports earnings on Wednesday.

On the tech front, chip giant Intel posts results Tuesday while Google reports on Thursday. The week is capped by earnings from General Electric on Friday.

The flood of Canadian corporate earnings reports generally lags the U.S. by a few weeks. The major domestic report of the week comes from Canadian Pacific Railway (TSX:CP)on Thursday.

Walter Spracklin at RBC Capital Markets has reduced his earnings per share forecast for CP Rail for the second quarter to $2.13 from $2.16, reflecting higher costs and lower per tonne grain revenue. However, he also raised his forecast for earnings per share in 2015 to $9.75 from $9.48 “on the expectation for grain volume strength to continue, which lifts our price target to $175 (from $171).” CP shares declined 31 cents to C$196.07.

Meanwhile, Craig Fehr, Canadian markets specialist at Edward Jones in St. Louis, says he is expecting earnings growth among Canadian and U.S. companies to come in around the mid-single digits for the quarter.

“All told, we will get another year of record profits for the S&P 500 and the TSX and that’s largely supportive of the markets at this point.”

Investors will also focus on monetary policy testimony from U.S. Federal Reserve chair Janet Yellen on Tuesday and Wednesday. They’re hoping for some hint as to the timing of future interest rate increases.

The energy sector was the leading TSX advancer, up one per cent as the price of oil edged higher after suffering its biggest one-day drop since April on Friday amid expectations of more supplies from Libya. August crude added eight cents to US$100.91 a barrel.

The gold sector was the biggest TSX drag, down about 2.65 per cent as August bullion dropped $30.70 to US$1,306.70 an ounce while investors took profits in the wake of recent gains. Gold prices had advanced for the past six weeks.

The base metals group lost 0.32 per cent while September copper was down two cents to US$3.25 a pound.

Elsewhere on the corporate front, Bombardier Aerospace (TSX:BBD.B) signed a number of agreements at the Farnborough International Airshow for its new CSeries aircraft. Bombardier says Chinese company Zhejiang Loong Airlines Co. has signed a letter of intent for 20 CS100 airliners that would be worth US$1.28 billion if all the orders were exercised.

Before the show began, Bombardier had announced on Saturday that U.K.-based Falko Regional Aircraft Ltd. signed letters of intent for up to 24 CS100 jets. Bombardier shares gained six cents to C$3.83.