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TSX higher, traders weigh nomination of dovish Fed chair, U.S. budget woes

TORONTO - The Toronto stock market closed higher Wednesday as the nomination of a new Federal Reserve chief who will likely be in no rush to wrap up stimulus measures helped to distract traders from American debt worries.

The S&P/TSX composite index gained 37.92 points to 12,730.33, while the Canadian dollar was down 0.24 of a cent to 96.21 cents US.

U.S. indexes generally shook off early losses following two days of sharp declines as President Barack Obama nominated Janet Yellen, currently the Fed's vice-chairwoman, to head the U.S. central bank.

Yellen’s appointment "does add certainty, in the absence of certainty for stocks," said Jim Russell, a regional investment director at U.S. Bank in New York.

"It perhaps keeps a little bit of a safety net under equities for the near, or intermittent, term."

Yellen has been a key architect of the Fed's efforts under chairman Ben Bernanke to keep interest rates near record lows to support the economy through US$85 billion of monthly bond purchases.

The Dow Jones industrials rose 26.45 points to 14,802.98 and the S&P 500 index moved 0.95 of a point higher to 1,656.4. But tech stocks suffered for a third day with the Nasdaq dropping 17.06 points to 3,677.78.

Traders also looked to the release of the minutes from the Fed's last policy meeting Sept. 18. At that time, the Fed surprised markets in deciding not to start tapering its asset purchases because, in its view, the economy just wasn't ready for such a step.

One reason why Fed policy-makers did not begin tapering last month was concern over whether the different arms of the U.S. government could agree on a budget and the raising of the debt ceiling.

Those minutes showed that nearly every member of the Fed thought that the central bank should see more data before slowing its bond purchases. But worries about whether a delay would confuse markets made the decision a close call.

Markets have been rattled in recent days as a deadlock over funding pushed the U.S. government into a partial shutdown last week.

The clock is also ticking toward an Oct. 17 deadline when the government hits its debt limit and starts running out of cash to pay creditors.

But amid the tough talk of recent days, there were hints of the possibility of a brief truce. There were indications that both sides might be open to a short-term extension of the $16.7 trillion borrowing limit and a temporary end to the shutdown, giving them more time to resolve their disputes.

And that fits in with what many analysts expect.

"I think you will get enough resolved, not fully resolved but enough to move forward with," said Sadiq Adatia, chief investment officer at Sun Life Global Investment.

Much of the concern about a potential default by the government bond has been concentrated in short-term government securities known as T-bills.

Portfolio managers at Fidelity Investments have been selling their short-term government debt holdings over the last couple of weeks. The largest manager of money market mutual funds in the U.S. said Wednesday that it no longer holds any U.S. government debt that comes due around the time the nation could hit its borrowing limit.

On the TSX, the telecom sector led advancers, up one per cent with BCE (TSX:BCE) ahead 97 cents to $44.70 while Telus (TSX:T) ran ahead 46 cents to $34.39.

The base metals group was up 0.5 per cent even as December copper fell six cents to US$3.23 a pound. First Quantum Minerals (TSX:FM) climbed 57 cents to C$18.12 but Thompson Creek Metals (TSX:TCM) fell 15 cents to $3.22.

The gold sector rose about 0.45 per cent as December bullion fell $17.40 to US$1,307.20 an ounce. Yamana Gold (TSX:YRI) gained 21 cents to C$10.15.

Industrials also lent support with Canadian National Railways (TSX:CNR) up 64 cents to $107.94.

The November crude contract on the New York Mercantile Exchange was off $1.88 at US$101.65 a barrel. The energy sector was up 0.25 per cent with Suncor Energy (TSX:SU) ahead 36 cents to C$36.17.

In earnings news, the Jean Coutu Group (TSX:PJC.A) posted quarterly net earnings of $208.2 million, or 99 cents per share, largely as a result of the sale of its stake in U.S. chain Rite Aid.

The retailer said it plans to return up to $502 million to shareholders by way of share buyback and a one-time dividend of 50 cents per share.

Excluding the one-item items, the company earned $49.9 million or 24 cents per share, about level with year-earlier earnings of $50 million or 23 cents but missing analyst estimates by a penny. Its shares fell 79 cents to $18.12.

The Canadian Press


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