TSX little changed, rail stocks benefit from 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 shook off early triple-digit declines to drift around the unchanged mark at mid-morning Tuesday with investors inclined to do little ahead of important economic data coming out later in the week.

The S&P/TSX composite index was down as much as 124 points in early trading but was later 6.8 points higher to 10,885.1 as gold stocks rose sharply and railway stocks got a boost in the wake of major acquisition activity in the U.S.

The tepid performance comes after the TSX moved down 32 points on Monday, adding up to a loss of over 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 Canadian dollar was up 0.03 of a cent to 92.81 cents US.

The gold sector was ahead 1.67 per cent as the December gold contract on the New York Mercantile Exchange gained $7.70 to US$1,061.70 an ounce. Goldcorp Inc. (TSX: G.TO) gained 94 cents to $41.08.

The TSX industrial sector was ahead 1.52 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 $1.63 to C$54.20 while Canadian Pacific Railway (TSX: CP.TO) advanced $2.12 to $49.34.

The energy sector was off 0.4 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 76 cents to US$77.13 a barrel. On the TSX, EnCana Corp. (TSX: ECA.TO) declined 68 cents to C$59.49.

The base metals sector fell 2.5 per cent as the December copper contract on the Nymex fell four cents to US$2.90 a pound. Teck Resources (TSX: TCK-B.TO) dropped 75 cents to C$30.39.

The TSX Venture Exchange was ahead 4.12 points to 1,293.74.

New York indexes also 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 40.3 points to 9,749.2.

The Nasdaq composite index moved 10.84 points lower to 2,038.36 while the S&P 500 index lost 4.55 points to 1,038.35.

The TSX financial sector was weak 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.

A rise in factory orders did little to ease investors' concerns about the economy.

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

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 fell 24 cents to $18.09.

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 four cents to $2.83.

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 1.37 per cent, Frankfurt's DAX slid one per cent while the Paris CAC 40 moved down 1.3 per cent.