TSX up amid slew of retail earnings

A women looks at an electronic stock indicator of a securities firm in the rain in Tokyo, Wednesday, May 21, 2014. (AP / Eugene Hoshiko)

TORONTO -- The Toronto stock market was higher Wednesday as traders felt reassured about the intentions of the U.S. Federal Reserve on rate hikes and looked to a run of positive earnings reports from the big banks.

The S&P/TSX composite index gained 99.85 points to 14,625.04. The Canadian dollar was down 0.3 of a cent at 91.46 cents US.

New York was also higher as minutes of the Federal Reserve's April 29-30 meeting showed that officials discussed how to unwind the support they've given the U.S. economy once they decide to begin raising the Fed's key short-term rate. The minutes stressed that the discussion should not be viewed as a signal that an increase in short-term rates is imminent.

The Dow Jones industrials jumped 132 points to 16,506.31, the Nasdaq climbed 21.94 points to 4,118.83 and the S&P 500 index rose 10.44 points to 1,883.27.

Traders also digested mixed news from the retail sector as Sears Canada (TSX:SCC) posted a quarterly net loss of $75.2 million, or 74 cents per share, up from a net loss of $31.2 million, or 31 cents per share, a year ago. Revenues came in at $771.7 million compared to $867.1 million a year ago, impacted by cold weather and store closures. It shares drifted 29 cents lower to $15.02.

Tiffany & Co. reported a 50 per cent spike in first-quarter earnings to US$125.6 million, or 97 cents per share, far above expectations of 78 cents per share. Revenue at the jeweller climbed 13 per cent to US$1.01 billion, also topping estimates. Tiffany also raised its earnings guidance for the year and its shares jumped 8.55 per cent to US$95.77.

And Target reported that adjusted earnings came in at 70 cents a share, a penny lower than expectations. Revenue of US$17.01 billion was in line with expectations and Target also lowered its outlook and its shares were ahead 40 cents to US$57.01. The results were released a day after the company replaced the president of its struggling Canadian operations.

Stock markets have been rattled in recent days by retail earnings and outlook disappointments. But analysts say it's important to remember that the sector has had an extremely challenging quarter and that the trend of recent economic data is positive.

"We have gone through a very harsh winter and we have gone through a spring that has not exactly been all that great and so that has had a pretty significant effect on a broad number of companies across the economy," said Colum McKinley, portfolio manager and vice-president, Canadian Equities, CIBC Asset Management.

"But we really need to look through the short-term dynamics of the effect of the weather and I think it would be too early to read this and interpret the results that we've seen as a broader economic slowdown."

Financials were a major gainer, up one per cent a day before the big Canadian banks start to release quarterly earnings results. Analysts are expecting another solid if unspectacular quarter.

"I think this is going to be a bit of a Goldilocks quarter for the banks, not too hot, not too cold," added McKinley.

"What we expect to see is consistent performance from the wealth business, modest loan growth but less of a tailwind than it has been in previous quarters."

On the commodity markets, the energy sector was ahead 1.15 per cent, while July crude in New York gained $1.70 to US$104.03 a barrel.

The base metals sector was up 0.4 per cent as July copper dipped two cents to US$3.12 a pound.

The gold sector was down 0.37 per cent as June gold faded $6.50 to US$1,288.10 an ounce.