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TSX, Dow surge as traders celebrate last-minute fiscal cliff deal

Proactive Investors
Wednesday, 2 January 2013

North American markets rallied Wednesday, as traders celebrated Washington’s last-minute deal to stave off the tax hikes and spending cuts that were to officially take effect on January 1.

Late Tuesday night, the House of Representatives approved a Senate-backed bill that raises tax rates on individuals making more than $400,000 and couples making over $450,000. 

While the deal in Washington averted higher taxes for nearly all U.S. households, cuts to military and domestic programs were only delayed for two months, during which Congress must come agree to come up with another plan to deal with the country’s rising debt.

As at about 12:15 p.m. EDT, the Dow Jones Industrial Average rose 229.70 points to 13,333.84, while the S&P 500 added 25.36 points to 1,451.55, and the Nasdaq advanced 68.72 points to 3,088.23.

Meanwhile, Toronto's main market was also higher, with the S&P/TSX Composite up by87.58, or 0.70%, to 12,521.11, while the more junior S&P/TSX Venture Composite rose 15.17, or 1.24% to 1,236.47.

Economic data out of the U.S. Wednesday, showed construction spending unexpectedly falling in November by 0.3% from a month earlier, as home building slowed and federal government expenditures declined. Economists were expecting growth of about 0.6%.

Elsewhere, the Institute for Supply Management's manufacturing index for December came in at 50.7, it was just barely above the 50 level that separates expansion from contraction.

Major Canadian economic data included the December RBC Canadian Manufacturing PMI which indicated minimal improvement in business conditions in the month with an index reading of 50.4 being just above the breakeven level of 50. 

The index was unchanged from the November level and has gone on a five-month decline since a peak of 54.8 in June.

Commodities were higher Wednesday afternoon, buoyed by enthusiasm over the budget compromise in Washington, with gold futures moving higher as the U.S. dollar tumbled. 

The yellow metal lately rose $12.40 to 1,688.20 an ounce, while silver futures added 78 cents to $31.01 an ounce.

Elsewhere, crude oil for February jumped $1.14 cents to $92.96 a barrel, while the base metal copper contract rose 8 cents to $3.73 a pound.

Gold giants were higher, with Kinross (TSE:K) up 0.72%, while Barrick Gold (TSE:ABX) moved 0.57% higher and Goldcorp (TSE:G) added 1.34%.

Toronto's main sectors were higher Wednesday.

Materials were up 1.64%, with advances seen Turquoise Hill Resources (TSE:TRQ) – up 9.61%, while Kirkland Lake Gold (TSE:KGI) (LON:KGI) rose 7.52% and Mercator Minerals (TSE:ML) added 6.12%.

Declines in the sector were led by Harry Winston Diamond Corp. (TSE:HWD) and AuRico Gold (TSE:AUQ), down 1.79% and 0.49%, respectively.

Energy was higher Wednesday, with advances seen in Athabasca Oil Corp. (TSE:ATH) – up 5.07%, while BlackPearl Resources (TSE:PXX) advanced 4.62% and Precision Drilling Corp. (TSE:PD) added 3.89%.

Declines in the sector were seen in Petrobank Energy and Resources (TSE:PBG)  - down over 90%, after it late Monday announced that its merger with its PetroBakken Energy (TSE:PBN) unit to form “New Petrobank” , was completed on December 31.

Through the merger, each share of Petrobank outstanding on the December 31 was effectively exchanged for 1.1051 shares of PetroBakken and one share of New Petrobank, which will own and operate Petrobank's existing heavy oil business.

The company noted that any trades in New Petrobank shares made on or after January 2 will not include the right to receive the PetroBakken shares to be distributed pursuant to the merger. 

Elsewhere, Encana Corp. (TSE:ECA) and Petrominerales (TSE:PMG) fell 1.98% and 1.28%, respectively.

Financials were lately higher, with Manulife Financial (TSE:MFC) up 1.7%, while the Royal Bank of Canada (TSE:RY) added 0.63% and Sun Life Financial (TSE:SLF) gained 1.18%.

In corporate news, shares of Zipcar Inc. (NASDAQ:ZIP)  shot up over 48% Wednesday afternoon, after Avis Budget Group (NASDAQ:CAR) announced it will buy the car-sharing company for $500 million in cash. 

Under the terms of the deal, Avis will pay $12.25 per Zipcar share, a 49% premium to the company’s Monday close. 

Meanwhile, Facebook Inc. (NASDAQ:FB) saw its shares rise 5%, after J.P. Morgan upgraded its price target on the stock to $35 from $29.

Turning to the junior resource sector, Petrodorado Energy Ltd. (CVE:PDQ) Wednesday said it has seen “exploratory success” at its Kamal-1X well in the Llanos Basin of Colombia, and expects to spud the second drilling location this month. 

In an update on its operations at the CPO-5 and Talora Blocks in Colombia, the company said it anticipates the spudding of the Loto-1 well in mid-January. 

Petrodorado, which has a 30-per-cent non-operated working interest in the CPO-5 block, said the area is currently under phase one of a two-phase exploration program.

With a total of five committed exploration wells, the operator and Petrodorado said they have identified “multiple prospects” for 3D and 2D seismic. 

On the OTC, shares of drug maker NanoViricides (OTCBB:NNVC) shot up 6.25% Wednesday, after the company hired interior design company Id3A as the architect for its laboratory and cGMP pilot production facility project.

The facility is being designed to produce sufficient quantities of the drugs needed for human clinical trials testing various nanoviricide drug candidates as they advance into the clinical pipeline. 

Titan Pharmaceuticals (OTCBB:TTNP) saw its shares hiked up over 14% Wednesday, after the FDA granted its pain killer dependence treatment, Probuphine, priority review designation.

The company said the FDA has also accepted for review its new drug application (NDA) for Probuphine - an implant placed under the skin to be used in the treatment of opioid dependence in adult patients.

Development stage biopharmaceutical company Soligenix (OTCQB:SNGX) Wednesday said that the FDA has granted orphan drug designation to its radiation therapy, OrbeShield.

Shares rose 2.5% after the company said in addition to a seven year term of market exclusivity for OrbeShield upon final approval, the FDA’s orphan drug designation also provides leverage to a wide range of financial and regulatory benefits.

OrbeShield is being developed for the treatment of gastrointestinal acute radiation syndrome, which occurs after toxic radiation exposure and involves several organ systems, notably the bone marrow, the gastrointestinal tract and later, the lungs.  

*Europe*

European markets also rallied on news of a fiscal cliff deal in the U.S., and didn’t seem fazed by Markit’s Eurozone Manufacturing Purchasing Managers’ Index (PMI) for December - which was revised down to 46.1 from an earlier preliminary reading of 46.3. The index has been below the 50 mark that separates growth from contraction since August 2011. 

European markets closed sharply higher today with shares in France leading the region. The CAC 40 was up 2.37% while Britain's FTSE 100 rose 2.20% and Germany's DAX advanced 2.19%.
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