Index Daily Change
S&P/TSX composite index 0.24% Drop
Dow Jones industrial average 0.03% Drop
Standard & Poor’s 500 Index 0.17% Gain
Nasdaq Composite Index 0.30% Gain

The Canadian stock market fell yesterday with the energy sector the leading laggard as investors took profits after 2 days of gains. The Canadian dollar made Canadian news as it hit parity with the U.S. dollar for the 1st time in more than 20 months.

In the short-term there is no catalyst to push stock markets higher (in Canada) until we hit 1st quarter earnings season in a couple of weeks. The price of oil had a yoyo day but settled higher for a 6th consecutive day, although the S&P/TSX Composite Energy Index, down 0.64%, failed to keep up with the oil commodity but fell with a 4% drop in the price of natural gas. The index’s materials sector was also lower down 0.59%, even as the price of gold firmed and copper hit a 20 month high.

The index was lower most of the day but briefly pared losses in the afternoon after minutes from the last U.S. Federal Reserve meeting suggested the Fed might continue to keep interest rates at their current ultra low level.

Shares of Research In Motion (RIM) were a key leader after the recent sell-off. The BlackBerry maker released updated tools to make it easier and faster for developers to create feature-rich web and wireless applications to be used on the company’s smart phones.

Also weighing on stock markets were developments in Greece’s debt woes. Greece’s government, concerned that the International Monetary Fund (IMF) could impose tough conditions in exchange for aid, wants to bypass an IMF financial contribution, senior government sources in Athens told media. A Greek finance ministry source denied the report.

In the United States the S&P 500 and Nasdaq rose modestly as the banking sector got a lift from positive analyst comments, while minutes from the Federal Reserve’s last meeting eased concern over rising rates.

The minutes suggested the central bank could keep interest rates at ultra-low levels longer than investors have anticipated if the economy worsens. Lower rates support financial shares, which have been at the center of the market’s year-long rally. The financial crisis seems to be contained, but there is still enough uncertainty and enough high unemployment that the Fed looks like they will have loose monetary policy (money supply) for an extended period of time. The minutes of the Fed’s March 16 gathering, released on Tuesday showed lingering concern about the economy’s prospects, with policymakers indicating they were in no hurry to raise interest rates. “The duration of the extended period prior to policy firming might last for quite some time and could even increase if the economic outlook worsened appreciably or if trend inflation appeared to be declining further,” the minutes said.

The Dow continued to eye the psychologically important 11,000 level, coming within 13 points of the milestone in afternoon trading in a brief run into positive territory after the Fed’s minutes. The Dow last crossed that key milestone in September 2008.

Meanwhile, Wall Street’s fear gauge, the Chicago Board of Options Exchange (CBOE) Volatility Index or VIX, closed at 16.23, its lowest close since October 9, 2007. On that day, the S&P 500 closed at 1,565.15, its all-time closing high (Hmmmmmmm………….). Expect to see a little profit taking in the next 2 weeks.

You also see higher mortgage rates in the United States (and Canada) which would pose a significant hurdle for a recovery in the housing sector.

This morning stock markets overseas are down by a marginal amount about 0.50%, oil prices and North America futures are down by a comparable amount.

Regards,

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

SVP & Partner