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TSX, Dow slip as fiscal cliff frenzy fizzles

Proactive Investors
Thursday, 3 January 2013

North American stock markets were mixed Thursday, as enthusiasm for the last-minute deal to avoid the fiscal cliff began to fade, and as traders await the release of the minutes from the Federal Reserve's policy meeting, last month. 

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. 

Relief over the deal, which many economists and analysts said was overzealous, led to a big rally for markets on Wednesday as traders celebrated.

However, 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, and Congress still has to come to an agreement on how to deal with the country’s rising debt.

As at about 11:50 a.m. EDT, the Dow Jones Industrial Average fell 3.76 points to 13,409.36, while the S&P 500 added 1.33 points to 1,451.55, and the Nasdaq advanced 3.76 points to 3,116.03.

Meanwhile, Toronto's main market was also lower, with the S&P/TSX Composite down by 6.86, or 0.05%, to 12,533.91, while the more junior S&P/TSX Venture Composite fell 1.84 points, or 0.15% to 1,238.

Economic data out of the U.S. Thursday includes the release of the minutes from the Fed’s December 11-12 meeting, which will be released at 2 p.m. EDT. 

At that meeting, the U.S. central bank said it would keep interest rates at near-zero levels so long as the unemployment rate is above 6.5% and inflation in the next two years is below 2.5%.

Investors also took in two mixed jobs reports ahead of the Fed's minutes and Friday’s all-important monthly nonfarm payrolls data.

The ADP private payroll report showed better-than-expected job gains of 215,000 in December, up sharply from November's gains of 118,000. But initial U.S. jobless claims for last week rose by 10,000 to 372,000, more than economists had anticipated and up from the previous week's 350,000.

Markets are also absorbing December sales figures from a raft of U.S. retailers this morning, and major automakers also posted sales data this morning. Ford's sales rose 1.9%, Chrysler's were up10%, and General Motors saw an increase of 4.9%. 

Commodities were lower Thursday afternoon, as enthusiasm over the budget compromise in Washington wore off, with gold futures moving lower as the U.S. dollar strengthened. 

The yellow metal lately fell $10.40 to 1,678.40 an ounce, while silver futures shed 6 cents to $30.94 an ounce.

Elsewhere, crude oil for February lost 28 cents to $92.84 a barrel, while the base metal copper contract fell 1 cent to $3.72 a pound.

Gold giants were lower, with Kinross (TSE:K) down 0.31%, while Barrick Gold (TSE:ABX) moved 0.29% lower and Goldcorp (TSE:G) lost 1.52%.

Toronto's main sectors were mixed Thursday.

Materials were lower, with declines seen in Golden Star (TSE:GSS) – down 5.82%, while Rubicon Minerals (TSE:RBY) and Jaguar Mining (TSE:JAG) fell 3.04% and 2.67%, respectively.

Advances were seen in Mercator Minerals (TSE:ML) – up 3.7%, while NovaGold Resources (TSE:NG) and Harry Winston Diamond Corp. (TSE:HWD) rose 2.31% and 1.96%, respectively.

Energy was higher Thursday, with advances seen in Petrobank Energy and Resources (TSE:PBG) – up nearly 6%, while Crew Energy (TSE:CR) and Petrominerales (TSE:PMG) both added more than 2%.

In other energy news, Consol Energy Inc. (NYSE:CNX) Thursday said it made two separate deals in the last days of 2012, selling its non-producing western Canadian coal assets for $127 million. 

A portion of the company’s coal assets in Alberta were sold to Ram River Coal Corp., while Sydney, Australia-based Riversdale Resources purchased a second asset for $24 million. 

Ram River acquired 100% of the Ram River and Scurry Ram coal properties and Riversdale will take control of the Grassy Mountain surface mine, where Consol's share of the recoverable reserves is estimated at 30 million tonnes. 

Financials were slightly higher, with Manulife Financial (TSE:MFC) up 0.51%, while the Royal Bank of Canada (TSE:RY) added 0.26% and Sun Life Financial (TSE:SLF) gained 0.64%.

In corporate news, clothing retailer American Apparel (NYSE:APP) posted a 14% rise in same-store sales during the month of December, and said it expects to see continued growth in 2013.

For the month ended December 31, the fashion retailer said the rise in same-store sales – or those open for at least a year, included a 9% rise in its retail store channel and a 59% increase in net sales for its online channel.

Wholesale net sales increased 12% for the month and total net sales increased 14 per cent to $63.5 million – higher than the $56 million it reported in the year ago period and its highest monthly sales ever.

For the year ended December 31, 2012, total net sales increased 13% to $616.7 million, up from $547.3 million in the year-ago period, with a 15% increase in comparable store sales and a 12% rise in wholesale net sales.

Clothing retailer Gap Inc. (NYSE:GPS) Thursday said it has acquired luxury and contemporary retailer Intermix Holdco for about $130 million in cash, and announced that its board approved a new $1 billion share repurchase program.

On the OTC, Implant Sciences Corporation (OTCQB:IMSC) Thursday said it has won a contract to sell its Quantum Sniffer QS-H150 handheld explosives trace detectors to a customer for critical infrastructure protection in Nigeria. Shares moved up 4.55% Thursday afternoon.

The high technology supplier of systems and sensors for homeland security and defense markets said that the deal marks the sixth sale to Nigerian customers in past seven months.

*Europe*

Some better-than-expected employment reports for December were released early this morning in Europe, with Germany's jobless numbers higher by 3,000, but lower than the 10,000 job losses economists were predicting.

In Spain, the number of people out of work fell by 1.2%.

European markets closed mixed today with shares in Britain’s FTSE 100 leading the region. The FTSE 100 rose 0.31% while the CAC 40 fell 0.26% and Germany's DAX declined 0.24%.
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