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TSX up amid bullish housing news, traders look to Fed for rate hike hints

TORONTO - The Toronto stock market closed higher Monday as traders hoped for hints this week about when the U.S. Federal Reserve may move on hiking interest rates.

The S&P/TSX composite index closed up 34.23 points at 15,338.47. The Canadian dollar was up 0.02 of a cent at 91.86 cents US.

A strong showing in the National Association of Home Builders/Wells Fargo builder sentiment index raised hopes for a rebound in the U.S. housing sector and also helped push New York's Dow industrials up 175.83 points to 16,838.74. The Nasdaq gained 43.38 points to 4,508.31 and the S&P 500 index rose 16.67 points to 1,971.73.

The Fed has kept short-term interest rates near zero since the financial crisis of 2008-2009.

Traders will initially look to the Fed minutes from its latest meeting on rates on Wednesday.

They'll also look to Friday when Fed chair Janet Yellen delivers the keynote speech at the central bank's annual meeting in Jackson Hole, Wyo., which has been the scene of other major announcements.

"And in particular, they remember back two years ago signalling the next round of quantitative easing (so) I can understand why people are so focused on it," said David Wolf, portfolio manager in the Global Asset Allocation group at Fidelity Investments, adding he doesn't think markets will end up any the wiser about rates.

"The (Fed) keeps on drilling it into us it is data dependent, not calendar dependent, and the data have been evolving generally in a positive direction that suggests that tightening is on the visible horizon. Anything more specific is just sort of market chatter that should be tuned out."

One reason higher rates are a concern is that investors could be tempted to put more of their money in investments with a higher guaranteed rate of return.

Inflation plays a big part in when rates will start to head higher and traders will also consider the latest reading on the U.S. consumer price index on Tuesday. Economists are looking for inflation to come in at an annualized rate of two per cent.

Sentiment was also helped along after the Russian and Ukrainian foreign ministers held talks in Berlin over the weekend. The discussions were aimed at ratcheting down tensions in eastern Ukraine, where pro-Russian militias have been battling Ukrainian forces.

The tech sector led TSX advancers with BlackBerry Ltd. (TSX:BB) ahead 17 cents to $10.61 as the company said that it has created a new business unit that will combine some of its most innovative technology, including QNX embedded software, Certicom cryptography applications and its patent portfolio.

The financial sector climbed 0.35 per cent in advance of a string of earnings reports coming in from Canada's big banks. Royal Bank (TSX:RY) reports Friday and its shares climbed 56 cents to $80.41.

The metals and mining sector gained 0.25 per cent while September copper was ahead a penny at $3.11 a pound.

The gold sector shed early losses to move up about 0.2 per cent while a lessening of geopolitical tensions pushed December bullion down $6.90 to US$1,299.30 an ounce.

The energy sector was the major decliner, falling 0.42 per cent as September crude dropped 94 cents to US$96.41 a barrel, near its lowest since April, as fears of supply disruptions from major producer Iraq faded, removing much of the risk premium that built up in May and June.

The Canadian Press


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