TSX up: gold stocks surge, rail stocks rise on Buffett deal to buy U.S. railway

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(The Canadian Press)

By Malcolm Morrison, The Canadian Press

TORONTO - The Toronto stock market reversed sharp early declines to move higher late Tuesday morning, due almost entirely to a surge in the gold sector but helped by railway stocks boosted by major acquisition activity in the U.S.

The S&P/TSX composite index was down as much as 124 points in early trading but was later points 49.3 points higher to 10,927.6.

However, the TSX had lost more than five per cent over the last seven sessions as investors worry about whether economic conditions can support the sharp gains racked up since March.

"The bar is being raised on what constitutes good news," said Avery Shenfeld, chief economist at CIBC World Markets.

"Three or four months ago, not bad news was good enough to lift the stock market and I think now at current levels, the market is more demanding in terms of what it wants to see, both on corporate results and particularly on economic data."

That point of view was reinforced by the lack of positive reaction to a rise in U.S. factory orders in September.

The Commerce Department reported that orders to U.S. factories rose 0.9 per cent, slightly better than the 0.8 per cent advance economists expected.

The Canadian dollar was up 0.58 of a cent to 93.36 cents US.

The gold sector was ahead 5.2 per cent as the December gold contract on the New York Mercantile Exchange gained $22.60 to US$1,076.60 an ounce. Goldcorp Inc. (TSX: G.TO) gained $2.26 to $42.40 while Barrick Gold Corp. (TSX: ABX.TO) was up $2.26 to $41.65.

The TSX industrial sector was ahead per cent after Warren Buffet's Berkshire Hathaway said it was buying Burlington Northern Santa Fe in a deal valuing the railroad at US$34 billion.

Berkshire Hathaway Inc. already owns a stake of about 22 per cent in Burlington Northern, and says it will pay $100 a share for the rest of the company. That is a 32 per cent premium over Burlington's closing price on Monday. The deal sent Canadian railway stocks higher with Canadian National Railway (TSX: CNR.TO) ahead $1.21 to C$53.78 while Canadian Pacific Railway (TSX: CP.TO) advanced $1.62 to $48.84.

The energy sector was off 0.56 per cent as oil prices turned lower after advancing strongly Monday on the strength of the latest readings on the U.S. manufacturing sector and housing resale data. The December crude contract on the New York Mercantile Exchange moved down 13 cents to US$78 a barrel. On the TSX, Suncor Inc. (TSX: SU.TO) declined 69 cents to C$34.90.

The base metals sector was flat as the December copper contract on the Nymex was unchanged at US$2.945 a pound. Teck Resources (TSX: TCK-B.TO) fell 42 cents to C$30.72.

The TSX Venture Exchange was ahead 16.08 points to 1,305.7.

New York indexes moved lower amid uncertainty about a raft of key economic developments later this week, which culminates in Friday's closely watched U.S. non-farm payrolls report for October. Statistics Canada also releases October employment data Friday.

And ahead of those announcements, the U.S. Federal Reserve is holding its scheduled meeting on interest rates and will issue a statement on rates and the economy Wednesday afternoon.

The Dow Jones industrial average declined 42.8 points to 9,746.7.

The Nasdaq composite index moved 10.24 points lower to 2,038.96 while the S&P 500 index lost 2.2 points to 1,040.7.

The TSX financial sector was weak, down 0.54 per cent as investor unease grew amid further efforts to restructure two of the U.K.'s largest banks. Lloyds said it was looking to raise about $34 billion through a share issuance, while the Royal Bank of Scotland got a $41 billion infusion from the government.

And Swiss bank UBS AG reported a third-quarter loss of about $542 million, due to hefty accounting charges.

In Toronto, Royal Bank (TSX: RY.TO) was down 63 cents to $54.25.

In other corporate news, health care products maker Johnson & Johnson announced plans to cut up to seven per cent of its global work force and streamline its business structure to save up to US$900 million next year.

MasterCard says its third-quarter profit came in at $452.2 million, reversing a year ago loss of $193.6 million.

However, worldwide purchase volume grew only 0.4 per cent, providing further evidence a global economic recovery is moving slowly.

On the Canadian earnings front, Talisman Energy Inc. (TSX: TLM.TO) saw its profits plunge in the third quarter as falling commodity prices and lower production output took their toll on earnings. The company reported a net income of $30 million or three cents per share, a significant drop from a year-ago profit of $1.4 billion or $1.40 per share. Talisman revenue was $1.5 billion, down from $2.7 billion in the same period last year and its shares declined 18 cents to $18.15.

Increased gold production combined with higher metal prices helped Northgate Minerals Corp. (TSX: NGX.TO) narrow its losses in the third quarter as revenues rose. Northgate posted a net loss of $8.6 million, an improvement from a year-ago net loss of $29.4 million. Quarterly revenues totalled $120.2 million, up from $99.3 million a year ago and Northgate shares gained 14 cents to $2.93.

Groupe Aeroplan Inc. (TSX: AER.TO), the loyalty program company spun off from Air Canada (TSX: ACE.TO), is expanding its international business with the $188-million purchase of Carlson Marketing, a U.S.-based customer-loyalty company that also has a presence in Europe, Asia and the Middle East. Its shares were unchanged at $8.90.

In overseas trading, Hong Kong's Hang Seng led Asia's losses, falling 1.8 per cent while Japan's market was closed for a holiday.

China's Shanghai index bucked the trend, gaining 1.2 per cent.

London's FTSE 100 fell 1.23 per cent, Frankfurt's DAX slid 0.96 per cent while the Paris CAC 40 moved down 1.08 per cent.