Financials push TSX lower; N.Y. also slides, Johnson & Johnson earns disappoint

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(The Canadian Press)

By Malcolm Morrison, The Canadian Press

TORONTO - The Toronto stock market was negative Tuesday afternoon but well off early lows as the energy sector moved up alongside oil prices and bullion stocks benefited from another record high close for gold.

However, trading was still sluggish as a disappointing earnings report from American health-care giant Johnson & Johnson gave investors an excuse to take some profits after a strong advance last week.

"In terms of the indexes, they're getting to the high end of their trading ranges, so people need to see something convincing to really take them through," said Colin Cieszynski, market analyst at CMC Markets Canada.

The S&P/TSX composite index, down as many as 137 points in morning trading, was off 25.3 points to 11,411.7 at mid-afternoon. Strong gains in mining and energy companies pushed the TSX up 4.36 per cent last week.

Meanwhile, rising commodity prices, a weak U.S. currency and a strong employment report for last month combined Tuesday to send the Canadian dollar to its highest level since the late summer of 2008.

The loonie was ahead 1.06 cents from Friday's close at 96.81 cents US after going as high as 97.47 cents US, its highest level since August 2008. The currency also surged 3.37 cents US last week.

The energy sector was ahead 1.8 per cent as the November crude contract on the New York Mercantile Exchange rose 48 cents to US$73.75 after running up $1.50 Monday amid expectations of stronger demand during the winter. EnCana Corp. (TSX: ECA.TO) climbed 68 cents to C$63.57 while Canadian Natural Resources (TSX: CNQ.TO) advanced $1.86 to $74.83.

Tuesday decliners were led by the financial sector, down 1.4 per cent in the wake of a downgrade of Goldman Sachs Group by analyst Meredith Whitney to neutral from buy. Goldman shares drifted $4.22 lower to US$185.93.

In Toronto, Scotiabank (TSX: BNS.TO) was down 62 cents to $46.64 and Manulife Financial moved 42 cents lower to $22.11.

The TSX Venture Exchange rose 14.2 points to 1,321.55.

American markets were also lower after Johnson & Johnson posted a one per cent increase in third-quarter profit and beats Wall Street expectations, even though generic competition reduced its sales.

The maker of Band-Aids, biotech drugs and Acuvue contact lenses just missed the revenue forecast, reporting total sales of US$15.08 billion. That's down five per cent from a year ago and its shares declined $1.35 to $61.18 in New York.

Investors want to see signs that businesses and consumers are picking up their spending and that companies have been able to drive higher profits through revenue growth, not just through deep cost cuts, which helped boost income in the second quarter.

"They're not telling us the hoped-for better-than-expected sales," said Linda Duessel, equity market strategist at Federated Investors. "We want sales growth now."

The Dow Jones industrials was down 28.4 points to 9,857.4 after rising about four per cent last week.

The Nasdaq composite index declined 4.04 points to 2,135.1 while the S&P 500 index fell 4.95 points to 1,071.25.

Other commodity prices were mixed with December gold on the Nymex ahead $7.43 to US$1,065 an ounce while copper backed off 6.25 cents at $2.79 a pound.

The gold sector rose 1.25 per cent with Yamana Gold Inc. (TSX: YRI.TO) ahead 32 cents to $12.94.

The TSX base metals sector was up 0.75 per cent as mining giant Rio Tinto announced it will double its interest in Ivanhoe Mines (TSX: IVN.TO) to 19.7 per cent. Ivanhoe says it will use the proceeds of Rio Tinto's US$388 million investment to advance the Oyu Tolgoi copper-gold mining complex in Mongolia. Ivanhoe shares dipped eight cents to $12.92.

Consumer discretionary and industrial stocks also pressured the TSX with Canadian National Railways (TSX: CNR.TO) declining $1.48 to $52.42.

Shares in auto parts giant Magna International (TSX: MG-A.TO) were down $1.14 to $45.43 as General Motors CEO Fritz Henderson said the automaker could finalize the sale of its German auto unit Opel as early as this week, about a month ahead of schedule.

Despite labour union objections over possible job losses, the sale of GM's Opel and Vauxhall units to Magna, which along with Russia's state-owned Sberbank acquired a 65 per cent stake in the German-based Opel from General Motors Co. last month, is expected to go ahead, Henderson told reporters.

NAL Oil & Gas Trust (TSX: NAE-UN.TO) has agreed to acquire Calgary-based Breaker Energy Ltd. (TSX: WAV.TO) in a deal valued at $403 million.

The Breaker deal, which is expected to close early December, will be the fourth significant transaction for NAL Oil & Gas this year.

NAL also acquired Alberta Clipper and Spearpoint Energy and entered a joint venture to develop the Cardium oil play. NAL shares lost four cents to $12.50 while Breaker shares rose nine cents to $5.79.

Norbord Inc. (TSX: NBD.TO), a troubled wood panel manufacturer controlled by Brookfield Asset Management (TSX: BAM-A.TO), said Tuesday it plans a reverse stock split that will reduce the number of shares outstanding.

Norbord's shareholders will receive one consolidated share for every 10 they hold prior to the transaction, effective Oct. 16 and its shares fell 13 cents to $1.49.