Rising energy prices and renewed interest in technology stocks propelled North American stocks higher Monday, shaking off some early doldrums and trumping continued credit-market worries.
The Toronto Stock Exchange's S&P/TSX composite index rose 141.58 points, or 1.1 per cent, to 13,130.92, closing above the 13,000 mark for the first time in a week. In New York, the Dow Jones industrial average moved into positive territory after a down morning to close up 57.88 points, or 0.5 per cent, at 12,240.01. The S&P 500 gained 7.84 points, or 0.6 per cent, to 1339.13, while the tech-heavy Nasdaq composite rose 15.21 points or 0.7 per cent to 2,320.06.
Technology stocks were the story of the day, as merger buzz drew investors to the sector, which looked ripe for some buying after dropping almost 15 per cent since the beginning of the year. The TSX information technology sub-index gained 2.3 per cent, led by big gains at Celestica (up 5.4 per cent) and Research in Motion (up 5.2 per cent).
Ironically, one of the companies that had helped fuel the interest in techs Monday - Nortel Networks Corp. - actually lost 1.1 per cent on the day. Before the market opened, the Wall Street Journal reported that Nortel and Motorola Inc. were in talks for a possible merger of their wireless infrastructure operations. But the story didn't develop further during the day, and some analysts suggested that such a deal might not be immediately beneficial to Nortel's stock price, as it could result in integration costs and possibly further restructuring charges. Motorola rose 2.8 per cent in New York.
Yahoo Inc. also drew interest to the tech sector, as its board rejected Microsoft Corp.'s hostile takeover bid. The move could leave the door open for a proxy battle or bidding war for the online giant, which sparked hopes among investors that a broader round of consolidation in the industry could be afoot.
Energy stocks rose 2 per cent in Toronto, while U.S. energy giant Exxon Mobil Corp. was the biggest contributor to the S&P 500's gains, as crude oil prices jumped $1.87 (U.S.) to $93.64 a barrel in New York. Venezuelan President Hugo Chavez threatened to stop oil shipments to the United States in retaliation for court orders freezing certain assets of the country's state-owned oil company, all part of an ongoing dispute over compensation to U.S. oil companies for the government's nationalization of a major oil project last year. Cold weather in the norhteast and a U.S. refinery outage also contributed to the rising price.
The markets largely shrugged off negative news on the credit front. Insurance giant American International Group Inc. said it may have understated some of its credit losses, raising the likelihood that the company faces further writedowns in the neighbourhood of $5-billion stemming from the U.S. subprime mortgage meltdown. AIG's stock plunged almost 12 per cent, wiping out more than $15-billion in market capitalization, but the market's negative reaction to the news remained largely confined to AIG and a few other insurers.
Copyright 2001 The Globe and Mail
