TSX to open lower, RIM to unveil new product
TORONTO - The Toronto stock market headed for a lower ahead of a long-awaited unveiling of new product by BlackBerry maker Research In Motion Ltd. and data showing a surprising weakening of the American economy in the fourth quarter.
The U.S. Commerce Department reported Wednesday that the economy shrank by 0.1 per cent, hurt by the biggest cut in defence spending in 40 years, fewer exports and sluggish growth in company stockpiles. Economists had expected growth of 1.1 per cent in the October-December period.
The Canadian dollar slipped 0.1 of a cent to 99.66 cents US.
U.S. futures turned lower following the release of the GDP report with the Dow Jones industrials down 16 points at 13,892, the Nasdaq futures dropped four points to 2,738.75 while the S&P 500 futures dipped 3.9 points to 1,501.2.
RIM (TSX:RIM) rolls out its new BlackBerry 10 operating system and smartphones Wednesday morning. The stock had declined over the past two sessions — 3.4 per cent Tuesday and a 7.6 per cent drop on Monday.
But that was viewed merely as profit taking as the stock has staged a huge comeback since hitting a fresh 52-week low of $6.10 last September. As of last Friday, RIM's share price had soared 50 per cent during January alone. In New York, RIM stock was ahead 1.85 per cent in pre-market trading.
Traders also looked to the wrapup of the Federal Reserve's meeting on interest rates.
No movement on interest rates is expected from the Fed. But traders will be looking for any hints as to when the Fed might start to wind up its current round of economic stimulus, which has involved buying bonds by increasing the money supply.
There has been a growing expectation that it may be tempted to reverse its position after minutes from the last meeting in December showed a split among members over how long to continue the stimulus. Some thought the program should be slowed or stopped before the end of 2013 amid concerns that the bond purchases would destabilize the economy.
Investors also digested earnings reports from corporate heavyweights including aircraft maker Boeing and online retailer Amazon.
Airplane maker Boeing Co. says its fourth-quarter profit fell 30 per cent to $978 million, or $1.28 a share, nine cents better than analysts expected. Adjusted profit dipped to $1.46 a share from $1.92 a share. Revenue rose 14 per cent to $22.3 billion, which was slightly below expectations. Boeing says its adjusted 2013 profit estimate of $6.10 to $6.30 a share assumes "no significant financial impact" from a move on Jan. 16 by the Federal Aviation Administration to ground the 787 Dreamliner pending a probe of its battery. Its shares rose 0.8 per cent in pre-market trading.
Amazon stock ran ahead eight per cent in pre-market trading even as the online retailer said after the market close Tuesday that fourth-quarter net income fell 45 per cent to US$97 million, or 21 cents per share, seven cents below estimates. Revenue of $21.27 billion missed expectations of $22.26 billion. But Amazon’s profit margin was much better than expected at 24.1 per cent compared with 20.7 per cent a year earlier. This could signal that Amazon is starting to reap some benefits from its investments.
Montreal-based IT services company CGI Group Inc. (TSX:GIB.A) says its first-quarter revenue more than doubled to $2.53 billion, up 147.5 per cent from a year earlier. CGI’s net income was $22.4 million or seven cents per share, after including $153.4 million of costs related to its takeover of a U.K. firm. On an adjusted basis, CGI reported 44 cents per share of earnings for the quarter.
Overseas, personal computer maker Lenovo Group said its quarterly profit rose 34 per cent to a record high of $205 million on strong sales of smartphones and tablet computers. Revenue rose 12 per cent to $9.4 billion, also a record.
Traders also looked to the release of employment data two days before the U.S. government comes out with its non-farm payrolls report for January.
Payroll firm ADP reported that the private sector created 192,000 jobs during January. Economists expect the government report to show that the economy created a total of 153,000 jobs, about the same amount as December.
Commodity prices lost some early momentum after the economic data was released as the March crude contract on the New York Mercantile Exchange inched up two cents to US$97.59 a barrel.
March copper on the Nymex gained four cents to US$3.73 a pound while February bullion advanced $11.10 to US$1,671.90 an ounce.
European bourses were lower as London's FTSE 100 index edged down 0.05 per cent, Frankfurt's DAX declined 0.23 per cent while the Paris CAC 40 slipped 0.12 per cent.
Earlier in Asia, Japan’s Nikkei surged 2.3 per cent to its highest closing since late April 2010, as the yen continued to weaken against the U.S. dollar. Hong Kong’s Hang Seng rose 0.7 per cent while South Korea’s Kospi rose 0.4 per cent after the government said manufacturing output rose 0.8 per cent in December from November.