TSX heads lower, BMO falls despite solid earnings, Potash makes big job cuts

The numbers on the TSX board are shown in this August, 2011 file photo. (Aaron Vincent Elkaim / THE CANADIAN PRESS)

TORONTO -- The Toronto stock market headed lower late morning Monday, held back primarily by the financials group even as Bank of Montreal (TSX:BMO) announced a dividend increase and posted earnings that beat expectations.

The S&P/TSX composite index fell 74.59 points to 13,344.98, off early lows as energy stocks turned positive.

Bank of Montreal's annual net profit hit a record $4.2 billion in 2013. That included $1.088 billion of net income in the fourth quarter, which was up one per cent from a year earlier. Its adjusted net income fell two per cent from a year ago to $1.102 billion or $1.64 a share.

That beat an estimate of $1.58 a share but Barclays said that "BMO reported a $121 million gain in Wealth Management that is not recurring and will not likely be treated as core (earnings) in the market."

"This represents roughly 19 cents a share and would take BMO's core number to $1.45, well below consensus."

BMO's return on equity also dropped to 15 per cent versus 15.6 per cent. Its stock fell $2.79 or 3.8 per cent to $70.74. But the TSX financial sector -- and BMO stock -- are up more than 20 per cent so far this year, leaving the shares vulnerable to a bit of profit taking.

"It's a small blip," said Allan Small, senior investment adviser with Holliswealth.

"It wasn't anything earth-shattering and so when you have a runup as we have seen, especially in the last couple of quarters of the main banks and you have an earnings report that doesn't kind of jibe with the rest of the runup, this is what you're going to get."

The bank's quarterly dividend will be increased by two cents to 76 cents per common share.

The Canadian dollar was down 0.14 of a cent 93.84 cents US.

U.S. indexes were also weak with traders cautious ahead of economic data later in the week that could give a better idea of where the Federal Reserve is headed in cutting back on stimulus measures.

The Dow Jones industrials off 72.66 points to 15,936.11, the Nasdaq dipped 1.84 points to 4,043.42, while the S&P 500 slipped 3.83 points to 1,797.07.

There is lot of U.S. economic data coming out this week, culminating with the release of the government's employment report coming out on Friday.

A strong employment report would raise concerns that the Fed is set to start tapering its US$85 billion of monthly bond purchases that have kept U.S. interest rates low and persuaded many investors to seek higher returns in the stock market.

Economists forecast that the American economy cranked out about 175,000 jobs during November, down 5,000 from October.

Canadian employment numbers also come out on Friday with economists expecting about 7,500 jobs were created during the month.

Another key Canadian report for the week is the merchandise trade balance report for October, which is being released on Wednesday. A steady run of trade deficits is one reason the loonie has tumbled more than seven cents US this year.

Other headwinds include a U.S. dollar that has risen alongside Feb speculation about tapering and a belief that the Bank of Canada won't raise rates until at least 2015.

The Canadian central bank makes its next interest rate announcement Wednesday morning.

The TSX financial sector lost 1.4 per cent. Other banks reporting this week and under selling pressure included CIBC (TSX:CM), which lost $1.32 to $90.06 while Scotiabank (TSX:BNS) declined 92 cents to $64.43.

Industrials fell almost one per cent with Canadian Pacific Railway (TSX:CP) down $3.32 to $163.24.

The gold sector was also a drag, down 0.3 per cent while February gold inched up 80 cents to US$1,222.70. Goldcorp (TSX:G) lost 23 cents to C$22.51.

The base metals sector was down 0.1 per cent while March copper was down one cent to US$3.17. Taseko Mines (TSX:TKO) dropped four cents to C$2.04.

The energy sector was the major gainer, ahead 0.7 per cent while oil prices were slightly higher in the wake of a stronger than expected reading on U.S. manufacturing Monday and ahead of a meeting of the Organization of Petroleum Exporting Countries in Vienna on Wednesday.

The January crude contract on the New York Mercantile Exchange edged $1.95 higher to US$95.27 a barrel. Suncor Energy (TSX:SU) rose 80 cents to C$37.73.

Elsewhere, Potash Corp. (TSX:POT) shares were up 16 cents to $33.87 after the fertilizer giant said that it is cutting its workforce by about 18 per cent, affecting about 1,045 people. The Saskatoon-based company says the decision is necessary because of soft demand for potash and phosphates.

European bourses were lower with London's FTSE 100 index down 0.7 per cent, Frankfurt's DAX lost 1.6 per cent and the Paris CAC 40 fell 2.34 per cent.