Resource stocks punish TSX

U.S. indexes were positive as the Dow Jones industrials climbed 54.84 points to 17,068.71, the Nasdaq gained 34.23 points to 4,586.52 and the S&P 500 index was up 7.25 points at 1,995.69.

Traders also focused on two major events next week.

Traders are wondering if the U.S. Federal Reserve will adopt a more hawkish stance at the end of its scheduled meeting next Wednesday on interest rates. The greenback has strengthened recently as markets anticipate the Fed might raise its benchmark interest rate sooner than the middle of next year, as previously expected.

They are also looking at the Scottish referendum on independence.

The vote Sept. 18 has provided markets with a good helping of uncertainty, particularly after recent opinion polls have shown the two sides neck and neck.

“I think the No side will prevail,” said Chris King, vice-president and portfolio manager at Morgan, Meighen and Associates.

“But it doesn’t matter whether they win or not, you have now cast an element of doubt as to whether this issue will arise again in the future. It will cast a pall over the U.K. for a while.”

The TSX was weighed down by a slide of about 2.25 per cent in the gold sector as December bullion faded $3.20 to US$1,245.30 an ounce. The sector has tumbled almost 10 per cent over the past month while low inflation, a relaxation of geopolitical concerns and an approaching end to Federal Reserve stimulus steadily pushed buillion prices lower.

The base metals sector was also a drag, down 0.9 per cent, although December copper was ahead a penny at US$3.11 a pound after prices had tumbled earlier this week on disappointing Chinese import data that raised worries about domestic demand.

The energy sector also helped push the TSX lower as October crude in New York dropped $1.08 to a nine-month low of US$91.67 a barrel after the Organization of Petroleum Exporting Countries said in a monthly outlook that demand for the cartel’s oil will be lower next year. A surge in U.S. production was expected to slash OPEC production to levels not seen since 2009, when output fell due to the global financial crisis.

Also, with China slowing and the eurozone possibly slipping into a third recession since the financial crisis, demand for oil remains weak while supply is ample.

The energy sector dropped 0.64 per cent.

Financials and techs were slightly higher.

Markets seem to have run out of steam recently after hitting a string of record highs this summer. Seasonality is part of the issue.

“When you get to September, October, you have a very clear idea of what this year’s earnings are going to be and an adjustment on next year’s earnings,” observed King.

“And I think that largely is why we see late fall corrections.”

Meanwhile, Bank of Montreal (TSX:BMO) has lowered its five-year fixed mortgage rate to 2.99 per cent from 3.29 per cent. The rate, good until the end of the month, is lowest currently offered by Canada’s big banks. Its shares were six cents higher at $84.30.

Empire Co. (TSX:EMP.A), parent of grocer Sobeys, reported after markets closed that consolidated net earnings, net of non-controlling interests, were $123.1 million or $1.33 per diluted share in its fiscal 2015 first quarter, up from $65 million or 95 cents a share a year earlier when the company booked a loss of $17.6 million from discontinued operations.

Adjusted net earnings were $131.7 million or $1.43 per share, well ahead of the average analyst estimate of $1.35 per share as compiled by Thomson Reuters. Revenue rose more than 35 per cent to $6.22 billion from just under $4.6 billion in the prior-year period, largely as a result of its Canada Safeway acquisition. The company’s stock had ticked eight cents lower to $74.42 on Wednesday.