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TSX closes flat, traders look to Fed meeting for clarity on winding up stimulus

TORONTO - The Toronto stock market closed little changed Tuesday as traders hoped that a two-day meeting of the Federal Reserve will end uncertainty over what the U.S. central bank may decide to do about cutting back on a key stimulus program.

The S&P/TSX composite index slipped 4.32 points to 13,180.09.

The Canadian dollar was down 0.21 of a cent at 94.25 cents US as the greenback strengthened ahead of a Fed announcement expected mid-afternoon Wednesday.

U.S. indexes were lacklustre with the Dow Jones industrials down 9.31 points to 15,875.26, the Nasdaq off 5.84 points at 4,023.68 and the S&P 500 index down 5.54 points to 1,781.

Traders played it cautious ahead of the Fed announcement as they weighed the odds of the Fed starting to taper bond purchases, which have been at US$85 billion a month. This third episode of quantitative easing by the Fed has underpinned a strong rally in many stock markets while keeping long-term rates low.

Opinion is split, with many analysts believing incoming chair Janet Yellen may hold off until March, allowing the Fed to collect more data pointing to a steadily improving economic climate and particularly job creation.

"I think people are more divided about (the outcome of) this Fed meeting than any single Fed meeting in a very long time," said Colin Cieszynski, market analyst at CMC Markets Canada.

"And because of that, even though the markets are pretty quiet now, whatever comes out of this, you’re going to have a fairly significant reaction. The markets aren’t moving much today because people don’t want to get themselves too far overextended."

Cieszynski thinks the Fed will likely do nothing this time around beyond commenting that they’re ready to start soon. Failing that, it might announce a small taper.

But he said it’s only a matter of time before the Fed acts.

"It’s not like if they don’t taper then they will keep QE going for another year or something. It’s only postponing the inevitable."

Gains on the Toronto market were led by a 1.7 per cent gain in the tech sector. Constellation Software (TSX:CSU) rose $11.04 or 5.34 per cent to $217.73, adding to Monday's 5.2 per cent rise after it said it will pay the equivalent of about C$350 million to acquire Dutch software company Total Specific Solutions (TSS) BV. BlackBerry (TSX:BB) fell seven cents to $6.48 three days before the smartphone maker posts earnings.

Auto parts companies helped push the consumer discretionary segment up 0.55 per cent, with Martinrea International (TSX:MRE) ahead 32 cents to $9.31 while Magna International (TSX:MG) climbed 89 cents to $84.55.

Resource stocks fell alongside commodity prices.

The energy sector was down 0.46 per cent while the January crude contract on the New York Mercantile Exchange was 26 cents lower at US$97.22 a barrel. Cenovus Energy (TSX:CVE) declined 34 cents to C$29.36.

The base metals sector was down 0.37 per cent with March copper down off a penny at US$3.32 a pound. HudBay Minerals (TSX:HBM) eased nine cents to C$7.62.

The gold sector faded about 0.3 per cent as February bullion fell $14.30 to US$1,230.10 an ounce.

In corporate news, Saputo Inc. (TSX:SAP) says it’s willing to pay substantially more for Australia’s Warrnambool Cheese and Butter if it can get most of its stock. The company is maintaining its base offer at AU$9 per share but says it will pay as much as AU$9.60 cash per share if it gets at least 90 per cent of WCB’s stock. That would value the deal at C$510 million. Saputo shares rose 60 cents to $47.77.

Hudson’s Bay Co.’s (TSX:HBC) chief operating officer, Donald Watros, will become the retailing company’s president in February. Watros is a former chief administrative officer of Saks Fifth Avenue, which HBC acquired in November for about $2.9 billion. HBC shares were up 46 cents to $18.76.

Canada Bread Co. Ltd. (TSX:CBY) is paying a special dividend of $8 per share. The bakery, which is 90 per cent owned by Maple Leaf Foods Inc. (TSX:MFI:), said the payment will be made on Jan. 6 to shareholders of record on Dec. 30. Its shares ran up 48 cents to $74.41.

The Canadian Press

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