Canada’s main stock index stumbled on Friday, closing lower for the first time in 9 days, as oil prices declined, pushing shares of the energy sector lower. Financials dropped further after their big gains.
We are also seeing a lot of profit taking coming in. The S&P/TSX composite index ended down 2.12% ending a string of 8 consecutive higher closes. For the week the index rose 2.4%.
The lower close did not attract much concern from investors given the size of the recent rally that preceded it. In short, things are not that perfect but things are getting better (or at least there is hope which we did not have 2 weeks ago). There is certainly more bad data to come, such as unemployment in the auto industry but stock markets are attempting to look ahead for the next 9 months and not the next 9 weeks.
In the United States financial shares fell for a 2nd day, giving up some of their recent sharp gains. The expectations for TALF were not met by any measure. Even so, the S&P 500 finished its best 2nd week run since 1974 as markets extended the prior week’s bounce off of 12-year low.
The Dow Jones industrial average slid 1.65%, the Standard & Poor’s 500 Index slid 1.98% and the Nasdaq Composite Index slid 1.77%.
This morning, stocks in Europe and Asia climbed and U.S. index futures gained (big time) as investors speculated the Obama administration’s plan to rid banks of toxic assets will spur growth. Petro Canada jumped 16% in Germany after agreeing to be bought by Suncor Energy to create the biggest Canadian energy company.
The MSCI World Index climbed for the 9th day in 10 days. The gauge of 23 developed nations has added 16% since March 9 as Citigroup, Bank of America and JPMorgan Chase said they made money in the first 2 months of 2009 and the Federal Reserve said it would buy $300 billion of government bonds to combat the worst financial crisis since the Great Depression.
Futures on the Standard & Poor’s 500 Index increased 2.9% as Timothy Geithner is expected to introduce the Public Private Investment Program today, expanding the bailout of the financial system by relying on enticing private investors to buy the troubled assets clogging banks’ balance sheets. The Treasury will initially put in $75 billion to $100 billion to launch the plan, taking money from the $700 billion financial rescue fund that Congress approved last year, according to an Obama administration official. The government money would be put alongside private capital (or maybe subordinated to it) and then leveraged up to $500 billion, or possibly double that amount, with the help of the Federal Deposit Insurance Corp and the Federal Reserve.
Regards,
Wilfred Vos Bcs, FMA, CIM, CFP, FCSI, DMS, CBV, MBA, CFA
SVP & Partner
