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At the open: Markets rise, but RIM stumbles after downgrade

Fernando Morales/The Globe and Mail

North American stock markets opened higher, although a pullback in commodity prices ahead of the opening bell kept gains in the resource-heavy TSX limited. An analyst downgrade for Research In Motion Ltd. spoiled sentiment for the BlackBerry maker, with the stock opening down about 2 per cent.

In early trading, the S&P/TSX composite index was up 47 points, or 0.3 per cent, at 12,687; the S&P 500 was up 7 points, or 0.4 per cent, at 1,509; and the Dow Jones industrial average was up 53 points, or 0.3 per cent, at 13,934.

Hewlett-Packard Co., which reported better-than-expected quarterly results Thursday night, opened up 8 per cent, helping to buoy spirits in the tech sector. The Nasdaq was up nearly half a percentage point at 3,146.

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Commodity prices, which were showing promise earlier this morning, are now largely in negative territory, with oil down 4 cents at $92.80 (U.S.) per barrel and gold down $6.90 at $1,571.

After a two-day decline in stock prices, some investors are betting it's time to buy on the dip. Stocks have been largely in retreat since the Fed on Wednesday spooked the market by releasing minutes from its recent meeting that suggesting the central bank may not be all that committed after all to open-ended stimulus. But bulls still have plenty of factors working in their favour, including the robust fourth-quarter earnings season that unofficially wrapped up Thursday with Wal-Mart and global economic data that's pointing to signs of further recovery.

There were some encouraging data out of Europe today to entice investors to keep bidding up stocks. A German business confidence survey for February rose to a 10-month high, rising to 107.4 from 104.3 in January. Not all the economic news was great though for the euro zone. The European Commission today downgraded its outlook for the region, forecasting gross domestic product will shrink 0.3 per cent this year, instead of the 0.1 per cent growth it expected it forecast in November.

Here in Canada, the loonie is taking a beating this morning, down by two-thirds of a cent at 97.61 (U.S.), a seven-month low, after a weak retail sales report and tame inflation data. Statistics Canada said inflation rose 0.5 per cent in January from a year ago, a little less than the 0.7 per cent consensus, in part due to lower gasoline prices. Meanwhile, retail sales slid 2.1 per cent in December from November, steeper than the 0.3 per cent drop economists had expected, with some of the weakness blamed on lower sales in the auto sector.

Italy will be in focus over the weekend as its parliamentary election begins. The stock market there could come under pressure and send shockwaves through the euro zone if a hung government arises out of the vote. Poll results suggest a win by Democratic Party leader Pier Luigi, who holds pro-market economic views. But whether he can form a stable coalition with a majority in both houses of the country's parliament is much less certain.

Here's a look at some of the key stocks on the move this morning:

MKM Partners downgraded RIM to "sell" from a "neutral" rating and cut its price target to $10 (U.S.) from $12. MKM analysts said they see a higher probability that the BlackBerry 10 devices will fail, based on stalling sales momentum in the U.K. and further testing of the new devices. MKM was especially critical of the applications that are available to users, commenting that the new operating system has less than 10 per cent of the most popular Android applications and fewer than 5 per cent of the most popular iPhone applications. They don't believe the device is different enough from the products of rivals to save the BlackBerry brand. RIM shares are down about 2 per cent.

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Onex Corp. recorded a $77-million net loss in the fourth quarter, an improvement from a year earlier as the conglomerate's revenue increased slightly and its cash flow from operations rose dramatically. Shares in ONEX opened up a marginal 0.2 per cent.

Hewlett-Packard Co. late Thursday said profit and sales dropped it its fiscal first quarter, but the results still bear analysts' expectations and the stock was up nearly 8 per cent at the open.

American International Group. Inc. reported an unexpected operating profit after the closing bell on Thursday. Shares are up 5 per cent.

Texas Instruments Inc raised its quarterly dividend by a third and said it would buy back an additional $5-billion in stock. Shares opened up 3 per cent.

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About the Author
Investment Editor

Darcy Keith is The Globe and Mail's Investment Editor. He has been a business journalist since 1992 and joined the Report on Business in 2010 from Yahoo! Canada, where he was the senior editor of finance. More


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