At midday: TSX slips as bank stocks weigh

Canada’s main stock index fell on Wednesday, weighed down by an earnings miss from Bank of Montreal and as investors assessed the latest monetary policy clues from the country’s central bank.

Bank of Montreal fell 3.1 per cent to $92.15 after reporting profits which were slightly below expectations, hit by a decline in income in the United States.

BMO was the first of Canada’s big banks to report quarterly earnings, with Royal Bank of Canada, Canadian Imperial Bank of Commerce and Toronto-Dominion Bank all due to report on Thursday.

The broader financials sector fell 1 per cent.

Home Capital Group Inc, Canada’s biggest non-bank lender, lost 2.3 per cent to $9.03 after saying late on Tuesday that said it had drawn down an additional $250-million from a high interest credit line.

At 11:26 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 95.74 points, or 0.62 per cent, at 15,381.20.

Nine of the index’s 10 main groups were in negative territory. There were three declining issues for every two advancers.

The Bank of Canada held interest rates steady on Wednesday, as expected, saying that while economic growth is likely to moderate in the second quarter, government measures to rein in the housing market have not yet had a substantial cooling effect.

Investors are also looking for clues to U.S. monetary policy with the scheduled release this afternoon of minutes from the last Federal Reserve policy meeting.

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U.S. stocks were modestly higher late on Wednesday morning, aiming for a fifth straight day of gains, as investors awaited Federal Reserve minutes of its May meeting that could cement the chances of an interest rate hike next month.

U.S. interest rates futures were steady. Fed funds futures implied traders priced in about an 83 percent chance of a rate hike in June, little changed from Tuesday’s close.

Investors are also awaiting more details regarding the Fed trimming its $4.5 trillion balance sheet, when the central bank releases the minutes at 2 p.m. ET.

“The real take from the Fed is that a June rate hike still seems to pretty much baked in the cake but I’m going to be looking at guidance as how they expect to start spending down their excess assets,” said Brad McMillan, chief investment officer for Commonwealth Financial in Waltham, Mass.

While recent economic data has been mixed, with signs of a dip in consumer sentiment and spending, the job market continues to strengthen. That could give the Fed impetus to continue with its path of monetary tightening.

Data on Wednesday showed home resales fell more than expected in April as a tight supply boosted prices and sidelined prospective buyers. A tightening labour market and historically low mortgage rates have helped the housing market recovery.

Mr. McMillan said the recent mixed economic data did not concern him as a lot of it was due to from first-quarter seasonality issues and that he expected an improvement in the current quarter.

The Dow Jones Industrial Average was up 31.67 points, or 0.15 per cent, at 20,969.58, the S&P 500 was up 2.15 points, or 0.08 per cent, at 2,400.57 and the Nasdaq Composite was up 9.63 points, or 0.16 per cent, at 6,148.34.

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Seven of the 11 major S&P 500 sectors were higher, led by the materials index’s 0.67-per-cent rise.

Financials, the index which will benefit the most from higher interest rates, was off 0.21 per cent after four days of gains.

The consumer staples index fell 0.12 per cent, weighed down by weak report from Lowe’s, the No. 2 U.S. home improvement chain.

Lowe’s dropped 4.3 per cent to $78.82 after it reported a lower-than-expected profit and comparable sales. Bigger rival Home Depot was off 0.2 per cent.

Jewelry retailer Tiffany sank 6.8 per cent after posting a surprise drop in comparable sales. Signet Jewelers , which reports on Thursday, was down 6 percent. The two were the biggest losers on the S&P.

At the other end was Intuit, which jumped 7.2 per cent after the tax-preparation software maker posted a profit topped estimates and also raised its revenue forecast.

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