December 5, 2013 / 1:37 PM / 5 years ago

TSX drops to six-week low on bank results, Fed fears

TORONTO (Reuters) - Canada’s main stock index dropped to a six-week low on Thursday after results from major banks weighed on financial shares and strong U.S. economic data heightened expectations that the Federal Reserve will scale back its monetary stimulus program.

An electronic board displays the midday TSX index in Toronto February 16, 2011. REUTERS/Mark Blinch

Shares of Royal Bank of Canada (RY.TO) and Toronto-Dominion Bank (TD.TO) fell after Canada’s two biggest lenders reported quarterly results. RBC also said Chief Executive Gordon Nixon will step down next summer after 13 years in his position.

Market focus returned to speculation about when the Fed would begin rolling back, or tapering, its bond buying program after a string of positive U.S. economic numbers this week strengthened the case for a Fed pullback.

On Thursday, a report showed the U.S. economy grew faster than initially estimated in the third quarter as businesses accumulated stock.

The Toronto stock market’s benchmark index fell for a third straight session on Thursday, with all of its sectors in negative territory. The benchmark, however, has gained in each of the past five months.

“It’s more of the markets taking a little bit of a breather here than going into a significant correction,” said David Cockfield, managing director and portfolio manager at Northland Wealth Management.

“You still have the underlying fear on the part of portfolio managers of being caught fully invested just when the market decides to really tank,” he added.

The Toronto Stock Exchange’s S&P/TSX composite index .GSPTSE closed 104.52 points, or 0.79 percent, lower at 13,200.40, its lowest since October 22.

Cockfield is neutral on Canadian equities, but expects the TSX’s growth in 2014 to mirror its performance this year. The benchmark is up about 7 percent in 2013.

All of the 10 main sectors on the index were in the red with financials, the index’s most heavily weighted sector, down 0.8 percent. RBC lost 1.2 percent to C$68.17, and TD gave back 1.4 percent to C$94.40.

RBC’s quarterly profit rose 11 percent, the country’s largest lender said, while TD said its quarterly profit rose 1.6 percent, missing expectations. TD also announced a 2-for-1 stock split.

Canadian Imperial Bank of Commerce (CM.TO) fell 1.4 percent to C$88.82 after reporting that its quarterly profit slipped 1.9 percent, with one-time charges offsetting a rise in retail and wealth management income.

The price of bullion tumbled, weighing on shares of gold miners. Goldcorp Inc (G.TO) shed 3.5 percent to C$22.14, and Barrick Gold Corp (ABX.TO) stumbled 2 percent to C$16.39.

Barrick addressed some investor demands for a more independent board on Wednesday, and it replaced two directors close to its founder with a pair of mining industry experts. Founder and Chairman Peter Munk will step aside in the spring.

Dollarama Inc (DOL.TO) posted a 20 percent rise in profit due to higher sales and new store openings, but the results fell short of expectations. The stock was down 2.4 percent at C$85.

($1=$1.06 Canadian)

Editing by Peter Galloway

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