The Toronto stock market was lower Wednesday as optimism arising from a solid earnings report from tech bellwether Intel Corp. was tempered by news that American shoppers cut back on spending for a second straight month.
The S&P/TSX composite index moved 29 points lower to 11,643.8 while the TSX Venture Exchange lost 1.33 points to 1,382.78.
The Canadian dollar was off 0.14 of a cent to 96.6 cents US.
Intel, the world’s biggest chipmaker, posted net income of US$2.89 billion, or 51 cents per share, for the quarter — its biggest quarterly profit in a decade. The results were well above the 43 cents that analysts expected, as large corporations started buying new computers for employees. Revenue also beat expectations, coming in at US$10.88 billion.
Intel also forecast higher gross profit margins and its shares advanced 96 cents to US$21.97.
Intel’s profit and outlook are considered good signs for the U.S. economy because the chipmaker manufactures 80 per cent of the processors that run PCs and has a large global reach.
Meanwhile, the U.S. Commerce Department reported that retail sales fell in June for the second straight month, down 0.5 per cent. The June decline was larger than the 0.2 per cent fall that economists had expected.
The decline followed a 1.1 per cent fall in May. Excluding autos, spending was down 0.1 per cent in June.
“Typically, one would expect faster retail sales ... five to six quarters after a recession, but considerable headwinds are obstructing the recovery,” observed TD Bank research analyst Alistair Bentley.
“Credit is still contracting across the household sector, limiting the funds available for discretionary purchases. Personal disposable incomes may suffer a setback if some of the Bush tax cuts expire at the beginning of 2011. Furthermore, while the job market is on the mend, we expect it to take years for employment to return to pre-recession levels.”
There are also indications the pace of the Canadian economy could be faltering. The Conference Board of Canada is forecasting that the country’s economic growth will continue at a slower pace in the second half of this year and in 2011.
The think-tank says the outlook for Canada depends largely on a recovery in U.S. household spending, which, as Wednesday’s U.S. retail report indicates, remains fragile.
The TSX energy sector was off 0.82 per cent amid lower oil prices. The August crude contract on the New York Mercantile Exchange slipped 66 cents to US$76.49 a barrel after the American Petroleum Institute said that crude inventories rose 1.7 million barrels last week, against a drop of 2.6 million barrels forecast in an analyst survey by Platts, the energy information arm of McGraw-Hill Cos.
Canadian Natural Resources (TSX:CNQ) backed off 34 cents to C$36.51 while Cenovus Energy (TSX:CVE) declined 36 cents to $30.01.
Transportation stocks helped push the industrials sector down almost one per cent as Bombardier Inc. (TSX:BBD.B) fell six cents to $4.75.
The base metals sector was down 0.36 per cent with the September copper contract on the New York Mercantile Exchange down one cent at US$3 a pound. Quadra FNX Mining (TSX:QUX) moved down 13 cents to C$11.02 and Equinox Minerals (TSX:EQN) lost eight cents to $4.22.
The gold sector lost 0.39 per cent even as bullion prices also softened with the August gold contract on the Nymex down $6.70 to US$1,206.80 an ounce. Barrick Gold Corp. (TSX:ABX) fell 25 cents to $44.35.
The TSX and the Dow industrials registered solid gains on Tuesday after aluminum giant Alcoa Inc. kicked off the second quarter earnings season by delivering earnings and revenue that beat expectations, along with a strong outlook for aluminum demand.
New York markets were mostly subdued in the wake of the retail sales report with the Dow Jones industrial average down two points to 10,361.
The tech-heavy Nasdaq composite index advanced 8.62 points to 2,250.65 in the wake of the Intel report while the S&P 500 index lost 1.15 points to 1,094.2.
In other corporate news, Corus Entertainment Inc. (TSX:CJR.B) had a $31.4-million profit for its fiscal third quarter, worth 39 cents per share, compared to a year-earlier loss of $145 million or $1.81 per share. The broadcaster’s revenues increased 12 per cent. Corus shares climbed 14 cents to $19.51.
West 49 Inc. (TSX:WXX) shares fell 13 cents to $1.28 after an American sports apparel retailer decided against making a bid for the Canadian sportswear firm. The stock jumped last week after Zumiez Inc. (Nasdaq:ZUMZ) said it might be prepared to top a $99-million takeover offer from Australia’s Billabong International.
Shares in money-management firm Sprott Inc. (TSX:SII) were up 25 cents to $3.55 after Eric Sprott said he is stepping down as chief executive from the firm he founded. The company said Tuesday that he will become chairman of Sprott Inc. and chief investment officer of Sprott Asset Management LP. The 65-year-old Sprott said it was time to work on a succession plan and he expects the move will give him more time to spend running the firm’s funds. Peter Grosskopf, who was president of Cormark Securities, takes over as CEO.
Overseas, Japan’s Nikkei 225 stock average climbed 2.7 per cent while Hong Kong’s Hang Seng rose 0.6 per cent.
European bourses turned lower with London’s FTSE 100 index down 1.07 per cent, Frankfurt’s DAX declined 0.41 per cent while the Paris CAC 40 was down 0.86 per cent.
