Canada’s main stock index finished slightly higher on Friday as optimism over the economic recovery boosted the financial sector but did not extend to most of the other sectors. A 1.81% gain in the index’s heavily weighted financials sector was a big turnaround from the opening bell and was almost single handedly responsible for the gain. The Bank of Canada’s mostly rosy economic outlook on Thursday carried through to the financials on Friday on hopes that the group will benefit from better economic times.

The S&P/TSX composite index closed up 0.11%, at 10,687.90. It dropped nearly 1% early in the day, pressured by disappointing results from U.S. companies such as Microsoft and Amazon.com. The TSX is up for a 2nd straight week, a 3.1% gain to build on the previous week’s 6.3% gain. Since its March 9th low, the TSX has risen more than 40%. The heavyweight energy and materials sectors both declined by 0.82% and 0.21% respectively.

In the United States, the Nasdaq fell, halting a 12 day advance, following Microsoft’s disappointing quarterly results, but gains in pharmaceutical and energy shares lifted the Dow and the S&P 500 to fresh 8 month closing highs. The results cast a cloud over what is so far, shaping up to be a stronger than expected 2nd quarter earnings season.

The Dow Jones industrial average rose 0.26%, the Standard & Poor’s 500 Index rose 0.30% but the Nasdaq Composite Index declined 0.39%. All three major U.S. stock indexes scored a 2nd straight weekly advance, with the Dow rising 4%, the S&P 500 gaining 4.1% and the Nasdaq climbing 4.2%. For the day, both the Dow and the S&P 500 hit their highest closes since early November 2008. Since hitting a 12-year closing low, the S&P 500 has gained 44.7%, the Nasdaq is up almost 55% and the Dow has risen about 39%. With 184 of the S&P 500 companies having reported 2nd quarter results through Friday, 77% of the companies have beaten forecasts, according to Thomson Reuters data. 2nd quarter results from companies in the Standard & Poor’s 500 Index have beaten analysts’ estimates by an average of 11%. Honeywell International and Verizon Communications are scheduled to announce earnings before the opening bell today.

Stock market gains were curbed by a report showing that U.S. consumer sentiment waned in late July to its lowest reading since April, according to the Reuters/University of Michigan Surveys of Consumers. The final July reading for the consumer sentiment index was 66.0, down from June’s reading of 70.8.

Evidence is mounting that the world’s biggest economies are emerging from their deepest recessions since World War II after the U.S. government and central bank pledged $12.8 trillion to revive growth following the freezing of credit markets in August 2007. The U.S. economy probably shrank at a 1.5% pace in the 2nd quarter, following a 5.5% contraction in the 1st three months, according to the median forecast of 66 economists surveyed by Bloomberg News before the Commerce Department figures are released on July 31st.

Stock index futures pointed to a slightly higher open on Wall Street, mirroring gains in Asia and Europe, on mounting optimism over a recovery in corporate profits that has fueled a sharp 2 week rally on stock markets worldwide. Oil rose for a 3rd day to hit its highest level in more than 3 weeks, near $69 a barrel, as equity markets gained on hopes of an economic recovery that would boost fuel demand.

Regards,

Wilfred Vos Bcs, FMA, CIM, CFP, FCSI, DMS, CBV, MBA, CFA

SVP & Partner