The Canadian stock market stayed positive for the day yesterday as Wall Street struggled significantly more with finding a direction amongst a “flurry” of economic news and mixed earnings. Statistics Canada said retail sales edged up 0.2% in February to $33.7 billion, driven by higher prices rather than sales volumes. Investors were also focused on comments from the Bank of Canada which said in its April monetary report that the recession is much more severe and will last longer than it previously thought (not a surprise as they always seem to be about two steps behind on everything).
Gold led the index with a gain of 2.4%, energy stocks contributed 2.1% and industrials added 1.8%. The benchmark was up 1.4%
Stocks are down for the week as investors have retreated after a six-week rally (but we could still have a good day today). Stocks did zig and zag yesterday as investors sorted through the profit reports and economic news.
General Motors said in the afternoon that it plans to temporarily shut down 13 of 20 North American plants this summer in order to reduce its inventory. The company has been hit hard by the recession and slowdown in auto demand and has until June 1st to cut its debt and labor costs or face Chapter 11 bankruptcy protection. Chrysler is reportedly set to enter Chapter 11 as soon as next week, The New York Times reported. The Treasury Department is overseeing the process, which will reportedly protect union members’ pensions and retiree health care benefits (in the United States). Italian carmaker Fiat will complete its acquisition of a 20% stake in the company while it is under bankruptcy protection. The U.S. Treasury Department is preparing a bankruptcy filing for Chrysler only as a matter of “due diligence,” Michigan Senator Debbie Stabenow said in an interview. “They are preparing all options,” Stabenow, a Democrat, said yesterday in Washington. The senator said she was told April 22 the filing was being readied.
Time is dwindling for Auburn Hills, Michigan based company to reorganize outside of bankruptcy. It has until April 30th to finalize an alliance with Italian automaker Fiat SpA, get its bank’s to agree to cut its debt and reach agreements with the United Auto Workers and Canadian Auto Workers unions on labor cost reductions (from $74 to $57 per hour). “This is very serious, we’re coming down to the deadline,” Stabenow said. Chrysler, surviving with $4 billion in U.S. loans, must win concessions and create the alliance to qualify for up to $6 billion more in loans. It shouldn’t be a surprise that the administration is planning for contingencies while trying to bring Chrysler and Fiat into a working partnership, said an administration official, who declined to be identified discussing the planning. In short, both GM and Chrysler need to demonstrate an ability to make money. If annualized car sales are less than 10 million units per year which is about 40% less than the 16 million units sold in North America in 2007.
March existing home sales fell to a 4.57 million unit annual rate from a 4.71 million rate in February in the United States according to the National Association of Realtors. The number of Americans filing new claims for unemployment rose last week to 640,000 from a revised 613,000 the previous week, topping economists’ estimates.
U.S. stocks rose as better-than-expected results from several banks lifted financial shares. However, investors wrestled with the possibility that the federal government’s “stress tests” on 19 major U.S. banks may reveal weaknesses, which created volatility in stocks throughout the day.
The Dow Jones industrial average gained 0.89%, the Standard & Poor’s 500 Index gained 0.99% and the Nasdaq Composite Index added 0.37%.
European stocks and U.S. futures rallied after earnings from American Express to Ford Motor and Italy’s Eni SpA beat analysts’ estimates, sending banks, carmakers and energy shares higher. Ford jumped 17% in New York pre market trading after its 1st quarter loss was narrower than estimated.
Regards,
Wilfred Vos Bcs, FMA, CIM, CFP, FCSI, DMS, CBV, MBA, CFA
SVP & Partner
