Market News: After the BellThe close: Ugly, even without SpitzerRTGAMNorth American stocks were not doing well before Eliot Spitzer fell from grace, but the news that the Governor of New York was involved in a prostitution ring - disclosed by the New York Times in the afternoon - certainly did not give the market a much-needed shot of confidence.
The Dow Jones industrial average closed at 11,740.15, down 153.54 points or 1.3 per cent. The broader S&P 500 closed at 1273.37, down 20 points or 1.6 per cent - and now just 3 points above its intraday low point in January. The selloff was widespread, with all 10 sub-indexes down for the day, led by materials and financials. In particular, Bank of America Corp., Citigroup Inc., General Electric Co. and Google Inc. were the biggest drags on the benchmark index.In Canada, the S&P/TSX composite index closed at 13,005, down 276.63 points or 2.1 per cent - its worst one-day performance since the last day of February.
Its greatest stars in recent months went noticeably dim: Potash Corp. of Saskatchewan Inc. fell 7.1 per cent, Research In Motion Ltd. fell 3.9 per cent and Goldcorp Inc. fell 4.2 per cent.Overall, the materials sub-index suffered a 4.2 per cent drop, its worst performance since the steep Jan. 21 plunge. If you are looking for things to worry about, this could be it:
Materials stocks have kept the overall index far above its global peers in recent weeks and well out of recession territory; if materials change direction now, the index could shift to catch-up mode.Then again, you cannot blame tumbling commodity prices on the stock market's retreat: Oil rose to a new record of $107.94 (U.S.) a barrel, up $2.79.
And while gold fell, its dip was very slight - to $971.90 an ounce, down $1.30.More likely, the overall softness is due to yet more concerns about the U.S. economy. UBS said in a note to clients on Monday that it now expects the U.S. Federal Reserve to hack interest rates by three-quarters of a percentage point on Mar. 18 - a massive cut by historical standards - instead of an earlier expectation for a half-point cut (which is still pretty hefty).
Economists there now believe the Fed's key rate will eventually fall to just 1.5 per cent by August."We are not forecasting a deep recession, due in large part to only a small drag from inventories this time," said Maury Harris, an economist at UBS. "
Still, even if the recession is ultimately 'milder than average,' as we project, data in coming months are likely to show additional weakening. Meanwhile, ongoing financial markets problems raise the risk of greater-than-expected weakness."
Copyright 2001 The Globe and Mail