Canada’s main stock index fell sharply yesterday, weighed down by shares of banks & insurance companies, which dropped for a 3rd straight day, with all 5 big banks among the top decliners. Gold miners also joined the sell-off, partly because of a higher U.S. dollar, which tends to draw attention away from alternative investments such as gold and equities. The energy group was unable to hold on to initial gains even as the price of oil edged above $79 a barrel.
In short, energy, materials and financials are strong areas of the overall economy but they have advanced significantly lately and investors are booking some profits. The S&P/TSX composite index finished down 181.34 points, or 1.61%, at 11,053.54. Rogers Communications did advance yesterday rising 5.4% after it reported higher-than-expected quarterly results as subscribers bought up smart phones like Research In Motion’s BlackBerry and Apple’s iPhone despite the recession.
In the United States the S&P 500 and the Nasdaq fell as investors booked profits following the stock market’s recent run-up, while a weaker-than-expected reading on a measure of consumer confidence sparked caution about the recovery of consumer spending. The Dow Jones industrial average “eked” out a slim gain as shares of Exxon Mobil & Chevron, both set to report quarterly results later this week, rose.
The Dow Jones industrial average gained 0.14% (below 10,000 again), the Standard & Poor’s 500 Index fell 0.33% and the Nasdaq Composite Index declined by 1.20%. The S&P 500 is now up 57.2% from the 12-year closing low of March 9th, having slipped from its recovery peak when it was up 62.3% from the same low.
On the economic front, the Conference Board’s index of consumer confidence fell to 47.7 in October, weaker than economists had forecast. The data showed consumers were increasingly concerned about job market conditions, reviving worries over the pace of an economic rebound. This report reminds us that the global economic recovery will be bumpy at best unless the consumer starts to feel better and spend more. Consumers are the foundation of the U.S. economy, so a weak confidence report does not build optimism.
Other data showed home prices rose for the 4th straight month in August. The Standard & Poor’s/Case-Shiller composite index of home prices in 20 metropolitan areas advanced more than expected in August.
The financial sector and credit markets have improved dramatically but the overall picture is still “mixed,” U.S. Treasury Secretary Timothy Geithner said. “The financial sector story is in a much stronger position than it was but it’s a mixed picture, the price of credit has come down dramatically.”
The Chicago Board Options Exchange Volatility Index VIX, Wall Street’s favorite barometer of investor sentiment or fear, shot up to its highest level in 4 weeks, indicating worries about future losses. It was about 4 weeks ago that we saw stock markets hit their most recent high and since then stocks have fallen between 4.5 to 5%. Although a nominal amount, it is a pretty hefty amount considering the fact that stocks have not fallen back by more than approximately 9% in this most recent bull run.
This morning Asia, Europe and commodities were all pointing down by slightly less then 1%. We will continue to see some pressure on North American markets as investors book some profits. Fundamentals remain strong and there is a lot of cash on the sidelines which will eventually ‘put a floor on any short-term price correction’
Regards,
Wilfred Vos Bcs, FMA, CIM, CFP, FCSI, DMS, CBV, MBA, CFA
SVP & Partner
