Stocks back off as Chinese trade data disappointment trumps Alcoa earnings

TORONTO – The Toronto stock market fell about one per cent Tuesday as further indications of a slowing Chinese economy helped extinguish early optimism arising from a better than expected earnings report from U.S. aluminum giant Alcoa Inc.

The S&P/TSX composite index dropped 122.45 points to 11,512.22 its fourth consecutive loss, and the TSX Venture Exchange dipped 12.62 points to 1,199.36.

The commodity-sensitive Canadian dollar slipped 0.32 of a cent to 97.79 cents US amid sliding oil and copper prices.

U.S. markets also lost steam even as Alcoa reported adjusted earnings of six cents per share, which beat the consensus estimate by a penny. Revenue dropped nine per cent to US$5.96 billion, mainly because of weak prices for aluminum in the slowing global economy.

Alcoa’s performance reflects broader economic trends because aluminum is used in a wide range of products from automobiles to beverage cans. The company’s reports are also know for kicking off the start to earnings seasons south of the border.

Despite the showing, expectations are generally low for second-quarter earnings. Big American multinationals are feeling pressure from a greenback that ramped up as the European debt crisis worsened in the quarter along with slowing economic conditions around the globe.

The Dow Jones industrials fell 83.17 points to 12,653.12.

The Nasdaq composite index was down 29.44 points to 2,902.33 and the S&P 500 index declined 10.99 points to 1,341.47.

Traders got another reminder of the fragility of the economic recovery after China’s trade growth plunged in June, hurt by weak U.S. and European demand.

Import growth fell by half from May’s level to 6.3 per cent while export growth declined to 11.3 per cent from May’s 15.3 per cent.

Growth in the world’s second-largest economy has tumbled to its lowest level since the 2008. That is bad news for companies and investors looking to relatively strong Chinese growth to shore up global demand as the United States and Europe struggle.

In particular, it’s also a negative for the resource-heavy Toronto stock market and the price of oil and metals.

Strong Chinese demand for commodities boosted prices for crude and copper and supported resource stocks on the TSX earlier in the year. But crude has fallen from US$106 in May, copper has tumbled 11.6 per cent and the TSX has fallen almost six per cent in 2 1/2 months. The Toronto market now is down about 3.7 per cent year to date.

“Any reason for being optimistic was China, India, Brazil, probably Russia, (other countries) in Southeast Asia,” said Jim Muir, director at Fraser Mackenzie.

“And it just looks like that’s all slowing. So the question is, is it just a normal slowdown and then they get going again? That’s our only hope in my estimation.”

Commodity prices fell following the release of the Chinese data with the August crude contract on the New York Mercantile Exchange down $2.08 to US$83.91 a barrel. Crude prices also fell after Norway intervened to halt a labour dispute that threatened its North Sea production.

The energy sector lost almost two per cent as Canadian Natural Resources (TSX:CNQ) gave back 48 cents to C$25.84 and Cenovus Energy (TSX:CVE) declined 66 cents to $32.25.

The base metals sector shed 2.3 per cent with August copper off three to cents at US$3.40 a pound. HudBay Minerals (TSX:HBM) was down 30 cents to C$7.79 while Teck Resources (TSX:TCK.B) fell 51 cents to $30.57.

The gold sector was off about 2.6 per cent as bullion gave up early gains to climb down $9.30 to US$1,579.80 an ounce. Barrick Gold Corp. (TSX:ABX) faded 99 cents to C$36.37.

The financial group stepped back 0.35 per cent and Scotiabank (TSX:BNS) gave back 48 cents to $52.50.

Research in Motion (TSX:RIM) shares were off 36 cents or 4.62 per cent at $7.44 as shareholders gathered for the BlackBerry maker’s annual meeting. Chief executive Thorsten Heins noted that there have already been major changes this year and promised that “there will be more to come as we work to turn around the company’s performance.”

The industrials group was down 0.46 per cent with heavy equipment dealer Finning International (TSX:FTT) off 58 cents to $23.09.

Shares in transportation giant Bombardier Inc (TSX:BBD.B) were up one cent to $4.04. Its subsidiary, Bombardier Aerospace, says Latvia-based Air Baltic Corp. has signed a letter of intent to acquire 10 of its next generation CS300 aircraft and take purchase rights on a further 10 of the passenger jets.

In other earnings news, drug store chain Jean Coutu Group (TSX:PJC.A) says unusual gains on its U.S. Rite Aid holdings as well as improved revenue helped quarterly earnings soar eight fold to $397.4 million and its shares rose two cents to $14.77.

Quebec-based convenience store and fuel station chain operator Alimentation Couche-Tard Inc. (TSX:ATD.B) reported quarterly net profit of US$117.8 million or 65 cents a share, up $53.3 million or 82.6 per cent from a year ago. Revenue for the quarter was up 28 per cent to US$6.06 billion and its shares ran up $1.66 to C$45.90.