Canada’s main stock index ended little changed yesterday as the financial and energy sectors regained a little investor interest but a declining gold sector held any gains in check as the gold sector dropped even with a higher gold price. The big banks in Canada led the gains as bargain-hunters bought up shares after the banking shares fell last week, even as some uncertainty over U.S. President Barack Obama’s plan to rein in big U.S. banks lingered and will linger for some time.
Bank of Canada Governor Mark Carney said that the U.S. plan for banks must strike a balance between preventing institutions from being “too big to fail” and the need to keep markets functioning effectively.
The Toronto Stock Exchange’s S&P/TSX composite index closed up 0.1% with 7 of the 10 sectors ending higher. Doubts about the strength of the U.S. housing recovery arose after a report showed U.S. existing home sales tumbled at the fastest pace on record in December (see below for more details). The housing report kept a cap on stock market gains.
Stocks gains after the selloff from last week which were among the worst since the stock market rally since March 9, 2009.
In the United States stocks snapped a 3-day slide as signs that Federal Reserve Chairman Ben Bernanke would win a U.S. Senate vote for a 2nd term helped ease investors’ concerns. The White House defended his record fighting the financial crisis in an effort to rally votes.
After the closing bell, iPod maker Apple reported sharp gains in quarterly revenue and profit, sending its shares 1.9% higher to $207.00 in after-hours trading. Chipmaker Texas Instruments posted its 4th quarter earnings and outlook for the 1st quarter after the close. Its stock dropped 1.2% to $23.40.
The Dow Jones industrial average gained 0.23%, the Standard & Poor’s 500 Index gained 0.46% and the Nasdaq Composite Index gained 0.25%.
Sales of previously owned U.S. homes suffered a record drop in the final month of 2009 as the boost from a popular tax credit waned, raising doubts the housing market recovery can be sustained without government support. The National Association of Realtors said that existing home sales fell 16.7% in December to an annual rate of 5.45 million units. It was the sharpest decline on record dating to 1968 and the slowest sales pace since August. Analysts had expected a less severe drop to a 5.90 million unit pace. The inventory of homes available for sale last month fell to 3.29 million units, the lowest since March 2006. At December’s sales pace, that represented 7.2 months’ worth of supply.
These figures clearly indicate that the rebound in housing demand observed so far in the United States has been largely supported by government programs and therefore that the recovery is far from becoming self-sustaining.
Some additional encouraging signs include the fact that the median home price rising in December is the 1st year-over-year gain since August 2007 and a decline in the inventory of homes available for sale. Housing has been recovering from a 3-year drop, driven by a tax credit for 1st time home buyers and low mortgage rates. The tax credit, which had been scheduled to end in November of last year, was expanded and extended until June of this year. Analysts said the extension should boost sales in months ahead but saw risks if it were phased out. Data ranging from pending home sales to builders sentiment have raised concerns that the housing market, which has been at the core of the worst U.S. economic downturn since the 1930s, might be slipping again. By mid-2010 the U.S. housing market will run into some more headwinds as the tax credit expires and mortgage rates probably rise.
This morning stocks dropped sending the MSCI World Index to its longest losing streak in 7 weeks, and commodities dropped on concern Chinese curbs on bank lending will curtail global growth. The U.S. dollar also strengthened furthering the drop in commodity prices.
The MSCI World Index dropped for a 5th day, losing 0.6% and futures on the Standard & Poor’s 500 Index retreated 0.8%. Bank of China and China Construction Bank were told to restrict new loans, potentially slowing expansion in the world’s fastest-growing major economy. Record government borrowing is troubling investors even as economies rebound. Standard & Poor’s cut its outlook on Japan’s AA sovereign credit rating to “negative,” citing diminishing flexibility to cope with debt.
The decline in U.S. futures indicated the S&P 500 may erase yesterday’s gain, before reports that may show the drop in U.S. home prices abated and consumer confidence climbed, putting the biggest part of the economy further along the path to recovery. The S&P/Case-Shiller home-price figures are due at 9 this morning and the Conference Board’s consumer confidence index is due at 10 this morning. In addition, we will continue on with the earnings parade as 130 companies in the S&P 500 continue to announce their earnings and outlook this week.
Regards,
Wilfred Vos Bcs, FMA, CIM, CFP, FCSI, DMS, CBV, MBA, CFA
SVP & Partner
