TSX rises amid weak U.S. consumer spending data

The Canadian dollar rose 0.25 of a cent to 93.52 cents US.

U.S. indexes were in the red with the Dow Jones industrials down 21.38 points to 16,846.13, the Nasdaq 0.71 of a point lower at 4,379.05 and the S&P 500 off 2.31 points at 1,957.22.

The U.S. Commerce Department says consumer spending rose 0.2% last month after no gain in April, missing expectations for a 0.4% rise.

“More importantly, in real terms, consumption fell for the second straight month, down 0.1% in May,” said BMO Capital Markets senior economist Jennifer Lee, who also observed that consumers still account for the “lion’s share” of the U.S. economy.

“Going forward, the second quarter will still see rebound but something in the order of around a 3% annualized pace, down from our call of 3.8%. This is very disappointing,” Lee said.

U.S. incomes rose a solid 0.4% in May, which met expectations, after a 0.3% April gain.

Meanwhile, on Wednesday, the final revision to American economic growth in the first quarter showed that U.S. gross domestic product shrank 2.9%, larger than the 2% contraction economists had expected. However, the decline was due in large part to severe winter weather.

Analysts also point out that markets are close to record highs and susceptible to negative news.

Phil Orlando, chief equity strategist at Federated Investors in New York, said the stock market has been rising a little too fast recently, so a slight drop in the summer months wouldn’t come as a surprise.

“I fully expect to see a hiccup here, but I wouldn’t get too worried about it,” he said.

On the corporate front, grocer Sobeys plans to close about 50 of its underperforming stores, most of them in Western Canada where parent company Empire Inc. (TSX:EMP.A) purchased the Canada Safeway supermarket chain.

Empire made the announcement as it also posted fourth-quarter adjusted net earnings from continuing operations of $131.3 million, or $1.42 per diluted share, beating estimates of $1.29. That compared with $95.7 million, or $1.40 per diluted share, in the same quarter of last year. Sales were $5.94 billion, up $1.68 billion year over year, narrowly missing expectations of $5.95 billion. It also upped its dividend 3.8 per cent to 27 cents a share but its shares gained 59 cents to $67.69.

Also, media giant Shaw Communications (TSX:SJR.B) reported quarterly earnings per share of 47 cents, two cents less than estimates. Revenue in the quarter was $1.34 billion, up 1% year-over-year and its shares were unchanged at $26.35.

The TSX finished the day close to session highs as financials gained ground, up 0.43%, and energy and golds erased early losses.

The energy sector was ahead 0.73% as oil prices declined while fears diminished somewhat over supply disruptions from Iraq, with the August contract down 66 cents US to $105.84 a barrel.

The gold sector advanced about 0.38% even as August bullion faded $5.60 to US$1,317 an ounce.

September copper was up a cent at US$3.17 a pound and the base metals component edged up 0.07%.