Canadian stock markets fell yesterday on lower gold prices and some disappointing U.S. earnings news, but advances in the oil & gas limited the overall declines. Gold-mining companies declined in line with the price of the bullion. After a sharp rally in the price of gold bullion that took it to record highs in the previous 2 trading days, the gold price dropped 1% as the U.S. dollar reduced some of its recent losses.
The financial sector also dropped after quarterly results from 2 big U.S. banks reduced investor enthusiasm for the sector. Quarterly results from Goldman Sachs and Citigroup failed to live up to the expectations of some investors after a strong showing by JPMorgan the day before. The S&P/TSX composite index closed down 0.25%.
Evidence that refiners severely curtailed their production of gasoline over the past week sent energy prices jumping across the board by more than 3%. The U.S. Energy Information Administration (IEA) reported that gasoline in storage fell by more than 5 million barrels at a time when most energy experts expected supplies to grow yet again. Oil prices hit a new high for the year, rising to almost US$78 a barrel. Refiners have been idling facilities because of a lack of demand at the same time that others have been shut down for routine maintenance.
The Canadian Real Estate Association says sales of existing homes during the 3rd quarter were among the strongest on record. National home re-sales through the Multiple Listing Service (MLS) totaled 135,182 in the 3rd quarter of 2009, up 18% from a year earlier and the most of any 3rd quarter on record. It was also the biggest year-over-year gain since 2002. In short, the Canadian housing market is quickly returning to health.
In the United States the Dow industrials and the S&P 500 climbed to 2009 closing highs, helped by energy shares as oil prices jumped, but financials retreated as investors analyzed the results from Goldman Sachs and Citigroup.
The Dow Jones industrial average gained 47.08 points, or 0.47%, to close at 10,062.94, a fresh 52-week high. The Standard & Poor’s 500 Index rose by 0.42% and the Nasdaq Composite Index added 0.05%.
Goldman’s earnings nearly grew 4 fold, largely because of strong investment trading results. Citigroup’s 3rd quarter loss was narrower than expected, but the company booked $8 billion in credit losses. Goldman’s stock fell 1.9% and Citigroup stock fell 5%, while an S&P financial index fell 0.7%.
On the economic front, data showed the Consumer Price Index (CPI) prices edged up in September and the number of workers filing new claims for jobless benefits dropped to a 9-month low last week in the United States. Stock markets will continue to feel the “push & pull” of earnings season as investors react to individual corporate results.
After the bell Google and IBM rounded out a strong week of technology results, beating high expectations and providing further evidence that a recovery is somewhat sustainable. While earnings results have been boosted by mass cost-cutting, investors have been looking for signs of life on the revenue front. IBM sounded an optimistic note as it forecast a return to revenue growth in the 4th quarter. Google posted its strongest sequential revenue growth in more than a year as advertising spending began to bounce back.
This morning U.S. stock-index futures and European shares fell as General Electric (GE) reported sales that trailed analysts’ estimates and Bank of America posted a loss. The U.S. dollar rose and commodity prices are falling. GE, the world’s biggest maker of jet engines, said revenue fell 20% to $37.8 billion, while Bank of America, the largest U.S. lender, posted a $1 billion 3rd quarter loss and sales that trailed analysts’ estimates. The reports came after companies from Google and Royal Philips Electronics to JPMorgan Chase had reported earnings that exceeded projections this week.
Stock markets will likely feel some downward pressure today.
Regards,
Wilfred Vos Bcs, FMA, CIM, CFP, FCSI, DMS, CBV, MBA, CFA
SVP & Partner
