Index Daily Change
S&P/TSX composite index 0.95% Drop
Dow Jones industrial average 0.51% Drop
Standard & Poor’s 500 Index 0.21% Drop
Nasdaq Composite Index 0.08% Drop
Canada’s main stock index closed higher yesterday after a 3-day slide as stronger than expected bank earnings and a firm gold price lifted two of the index’s biggest sectors. The financial sector was up about 1.08%, boosted by healthy results from Canadian Imperial Bank of Commerce (CIBC) and National Bank of Canada.
The results kicked off the financial sector’s earnings season, and raised the outlook for rivals’ profits next week.
Gold shares were also among big gainers, lifting the materials group 2.76% after the price of gold moved above $1,100 an ounce. The Toronto Stock Exchange’s S&P/TSX composite index rebounded from an earlier decline in the day of nearly 1%.
The TSX had opened lower as soft U.S. economic data cast doubt on the pace of the global economic recovery, while Greece’s sovereign debt woes continued to weigh on investor sentiment.
In the United States stocks recovered most of their losses but ended lower after weak employment and durable goods data added to recent worries about the strength of the economic recovery. Rumors of a 4-for-1 stock split planned by Apple Inc. (current share price $202) helped with the late-day rebound in stocks. Stocks typically receive a small lift when they split their stock since a lower priced stock makes buying a share more financially accessible to a greater number of investors and the more investors trying to buy a limited number of shares the greater the demand and the higher the price (as the theory goes…).
Some analysts believe that stocks are currently a little oversold and are set to advance again. Investors are looking at the market as a buying opportunity based on the recent pull back.
Still, poor news on durable goods orders excluding transportation, which unexpectedly fell in January, and a jump in weekly jobless claims, did negatively impact the stock market. The Commerce Department said durable goods orders, excluding transportation, slipped 0.6% last month, but overall orders jumped as consumer aircraft bookings surged 126% (we are flying more). The data came on top of disappointing reports on consumer sentiment and home prices and sales earlier this week. In short, Q4 2009 was a strong economic quarter but in Q1 2010 the economy is having a harder time as unemployment remains stubbornly high and home values remain depressed thereby hurting consumer spending.
Concerns about the debt loads of some euro-zone countries were revived after rating agencies said they might downgrade Greece’s sovereign debt rating. The news added to investor anxiety. Moody’s said a change in Greece’s rating would depend on whether Athens could smoothly enact a fiscal reform plan, while Standard & Poor’s said a downgrade by one or two notches in the next month was possible. The move could exacerbate Greece’s problems.
Health insurance stocks were in focus as U.S. President Barack Obama and Republicans clashed at a summit on his stalled healthcare overhaul. Also in Washington, Federal Reserve Chairman Ben Bernanke said in his 2nd day of congressional testimony that U.S. regulators are looking into how Wall Street firms like Goldman Sachs helped Greece arrange derivatives deals that critics say were used to disguise the size of its budget deficits.
This morning stocks rose around the world on evidence of sustained economic expansion. The MSCI World Index of 23 developed nations’ stocks added 0.5%. Indian Finance Minister Pranab Mukherjee predicted that the economy may grow at a 10% pace in the “not-too-distant future,” helping restore investor confidence that was rattled this week by warnings about Greece’s rising deficit. Commodity prices are also a little higher.
In the near-term you will probably see investors remain a little cautious but they will likely be investing opportunistically. Companies are reporting some good earnings and some earnings growth which should help support current stock prices.
Regards,
Wilfred Vos Bcs, FMA, CIM, CFP, FCSI, DMS, CBV, MBA, CFA
SVP & Partner
