The TSX Composite Index dropped more than 3% yesterday, driven lower by weakness in energy and financials. While more economic news reinforced a “sour” sentiment and the financial markets again appear to be on edge.
US Treasury Secretary nominee Timothy Geithner yesterday warned of stronger policies against China. This had adverse effects on Asian equity markets and added to the already risk adverse environment.
Microsoft Corp’s stock fell nearly 12% at one point yesterday to its lowest level since 1998 and was among the top drags on both the Dow and Nasdaq, after the world’s largest software maker said it would cut up to 5% of its estimated work force over the next 18 months. The company cautioned that it could no longer offer profit forecasts for the rest of the fiscal year after posting a quarterly profit that fell short of expectations. The tech bellwether shook up Wall Street by releasing its earnings before the opening bell, instead of after the close as expected – investors hate surprises and this was a big surprise. In a positive sign for tech stocks this morning, Google posted strong 4th quarter earnings after the bell yesterday and beat Wall Street’s forecasts (stock is up 2.8% this morning). Apple also generated some good results, its stock advancing by more than 6% but AMD lost about 5.9% after reporting weaker numbers.
Stocks did “pare” losses late in the day after comments from the White House that it is committed to moving as quickly as possible on a stimulus package and that President Barack Obama’s administration will do everything possible to restore growth and normalize these markets.
The Dow Jones industrial average fell 1.28%, the Standard & Poor’s 500 Index fell 1.52%, the Nasdaq Composite Index fell 2.76%.
However, the big news of the day was that U.S. economy showed further signs of deterioration as initial weekly claims for jobless benefits rose to a seasonally adjusted 589,000, and housing starts sank 15.5% to a seasonally adjusted annual rate of 550,000 units which is the lowest on record.
This morning we are seeing some dismal economic data from Europe, including a steep fall in U.K. 4th quarter GDP. This has weighed heavily on overseas markets this morning and futures (oil is also down a little more this morning but still above $42 per barrel), as has weak corporate results from Asia. GE also reported, and called for an “extremely difficult” 2009. The Wall Street Journal reports that Pfizer is in talks to buy Wyeth for $60 billion.
Thus, lots on the go and more volatility as the economy starts to ‘bottom-out’
Regards,
Wilfred Vos Bcs, FMA, CIM, CFP, FCSI, DMS, CBV, MBA, CFA
SVP & Partner
