TSX lower as upbeat bank earnings fail to impress; Wall Street also retreats

TORONTO – The Toronto stock market pulled back slightly Thursday as traders appeared to take a negative view of details behind otherwise upbeat earnings reports from most of Canada’s big banks.

The S&P/TSX composite index closed down 3.47 points at 15,107.00 despite earnings reports now from five of the country’s six largest banks, all of which have beat analyst expectations. The last of the Big Six, Scotiabank (TSX:BNS), reports Friday.

However, analysts have pointed out that most of the earnings have come from the banks’ capital markets business, which many view as less sustainable than those derived from personal and commercial banking.

Banks reporting Thursday included CIBC (TSX:CM), which almost tripled its net earnings in the second quarter, and Royal Bank (TSX:RY), which boosted net earnings 14 per cent. Both saw their share prices improve marginally.

TD (TSX:TD) said its net profits fell seven per cent but, after stripping out one-time items that included a $337-million restructuring charge, it joined the other two in beating expectations on adjusted profit. Still, its stock fell 61 cents, or 1.09 per cent, to $55.37.

Shares of the Bank of Montreal (TSX:BMO) and National Bank (TSX:NA), both of which reported a sharp increase in profits on Wednesday, also declined marginally on Thursday.

The loonie was up 0.16 of a U.S. cent at 80.42 cents.

In commodities, traders put the brakes on three days of declines in oil prices as the July contract for benchmark West Texas Intermediate crude gained 17 cents to US$57.68 a barrel. However, the important TSX energy sector was still down 0.06 per cent.

The metals and mining sector was also a drag, down 0.45 per cent as July copper slipped a fraction of a penny to US$2.77 a pound. The gold sector was the leading advancer as August bullion gained $2.30 to US$1,188.80 an ounce.

In New York, the Dow Jones industrial average was down 36.87 points at 18,126.12, while the Nasdaq lost 8.61 points to 5,097.98 after soaring to a record high close Wednesday and the S&P 500 gave back 2.69 points to 2,120.79.

Observers said Wall Street traders appeared to be put off by disquieting news from overseas that began with a big sell-off in China that saw the Shanghai Composite plunge 6.5 per cent.

Also top of mind was the Greek sovereign debt crisis as traders continued to get mixed messages about a possible deal between Greece and its creditors. Failure to secure such a deal could lead to Athens defaulting on its debts, with knock-on effects for the euro and the world economy.

In economic news, Statistics Canada reported the country’s current account deficit widened to $17.5 billion in the first quarter, driven largely by the collapse in oil prices. That was much worse than the revised $13.1-billion deficit in the fourth quarter of 2014, but better than the consensus forecast of an $18.6-billion deficit.

— With files from The Associated Press