Canada’s main stock index closed lower on Friday as a slide in oil prices pulled down the resource heavy index, but it still notched up its 4th straight week of gains. They fell with oil prices, which turned lower a day after rising to near an 8 month high.
The TSX index’s energy sector fell 1.16%, the materials sector dropped by 1.57% with the S&P/TSX composite index finishing down 0.65% for the day but up by 0.7% for the week. The lower close did not prompt much concern among analysts as it was seen as a controlled move, unlike the triple digit drops recorded en route to the March 9th low.
It is very clear that there is enough cash on the sidelines so that if there is a bit of a dip investors are easily willing to reinvest thereby, providing some downside stability.
In the United States the Dow moved into positive territory for the year for the 1st time since early January on Friday, lifted by defensive sectors like pharmaceuticals. The healthcare sector rose as investors rotated money into defensive stocks. Defensive stocks of companies tend to weather a recession better than others because their products such as food, toothpaste or drugs are things that people buy, even if they cut spending, in leaner times.
The S&P 500 has risen 39.8% since hitting a 12-year closing low in March, leading some analysts to believe a pullback is on the horizon.
The Dow Jones industrial average gained 0.32%, the Standard & Poor’s 500 Index gained 0.14% and the Nasdaq Composite Index declined by 0.19%. For the week, the Dow gained 0.4%, the S&P 500 added 0.7% and the Nasdaq rose 0.5%. For the year, the Dow is up 0.26% (in U.S. dollars).
The Reuters/University of Michigan Surveys of Consumers showed consumers’ mood in June stood at its highest in 9 months, but worries about inflation and the labor market uncertainty persisted.
This morning stocks fell, sending the MSCI World Index lower for a 2nd day, and commodities dropped after the Group of 8 (G8) finance ministers signaled they may start to withdraw stimulus spending. At some point, governments will have to map out their exit strategy in a coordinated fashion but that will not happen until at least next year.
The MSCI index of 23 developed nations slid 1% this morning while futures on the Standard & Poor’s 500 Index decreased 1.3%. Oil declined as much as 1.9% in New York. The MSCI has rebounded from a 13 year low in March on speculation the $12.8 trillion pledged by the U.S. government and Federal Reserve will end the deepest economic contraction since the Great Depression. The rally pushed the index’s value to 18.2 times the earnings of its 1,655 companies, the most expensive level since December 2004, weekly data compiled by Bloomberg showed.
Regards,
Wilfred Vos Bcs, FMA, CIM, CFP, FCSI, DMS, CBV, MBA, CFA
SVP & Partner
