Tumbling oil sends TSX lower but bank stocks limit losses TheStar.com - Business - Tumbling oil sends TSX lower but bank stocks limit losses May 30, 2008
Sliding oil prices sent the Toronto stock market lower yesterday, but losses were moderated by gains in the financial sector even as more big banks released earnings showing much poorer performance than a year earlier.
Toronto's S&P/TSX composite index fell 111.45 points, or 0.76 per cent, to 14,577.17. The TSX Venture Exchange was down 19.65 points to 2,628.6 while the Canadian dollar was ahead 0.08 of a cent (U.S.) to 101.1 cents as Statistics Canada reported that higher commodity prices helped boost the current account surplus to $5.6 billion in the first quarter, up from $3.96 billion a year ago.
N.Y. stocks advance
Lower oil prices also helped send New York markets higher, as did a government report that the economy grew at a faster pace than had been estimated. The Dow Jones industrial average rose 52.19 points to 12,646.22. The Nasdaq composite index gained 21.62 points to 2,508.32 and the S&P 500 index advanced 7.42 points to 1,398.26.
Financials lend support
After a shaky start, the TSX financial sector provided support, rising 1.2 per cent with nearly all banks in the group ahead despite more writedowns connected with U.S. mortgages – with one notable exception.
CIBC fell $1.39 (Canadian) to $69.46 after a second-quarter net loss of $1.11 billion, down from year-ago net income of $807 million. The quarter included a loss of $2.48 billion on writedowns of structured credit.
Royal Bank of Canada said its second-quarter net income came in at $928 million, down by 27 per cent from a year ago, impacted by higher provisions for credit losses in its U.S. banking business. RBC shares were ahead $1.07 to $50.53.
National Bank of Canada added 68 cents to $53.08 as its second-quarter profit fell 29 per cent as it booked $73 million in losses related to asset-backed commercial paper.
Kate Warne, Canadian market specialist at Edward Jones in St. Louis, Mo., says the generally positive showing in the financial sector showed that "people are getting more comfortable that the writedowns are sort of part of the normal business cycle and it's something you don't worry too much about."
Energy stocks slide
The TSX energy sector moved down 2.8 per cent as oil prices dropped $4 (U.S.) as concerns about global energy demand and strength in the dollar countered a government report showing the biggest decline in U.S. stockpiles since 2004.
U.S. crude settled down $4.41 at $126.62 a barrel. Crude prices have risen more than 42 per cent since early December.
"It's not too surprising you're seeing a lot of volatility with the kind of price increase we have seen over the last few weeks," Warne said.
EnCana Corp. lost $2.46 (Canadian) to $88.41 while Suncor Energy moved down $2 to $66.89.
Gold pulls back
Gold pulled back as the U.S. dollar strengthened on the possibility that the U.S. Federal Reserve will have to increase interest rates to deal with inflation fuelled by high energy prices.
The August bullion contract in New York closed down $23.30 (U.S.) to $881.70 and the TSX gold sector retreated 3.7 per cent with Barrick Gold down $1.57 (Canadian) to $38.77 and Kinross Gold Corp. faded 61 cents to $19.45.
The base metals group pulled back 2.4 per cent as Teck Cominco Ltd. dropped $2.20 to $47.41.
TSX decliners beat advancers 922 to 640 with 233 unchanged as 337 million shares traded worth $6.9 billion.
Tin drops most ever
Tin, used in cans and for soldering, fell the most ever on the London Metal Exchange as investors and analysts judged the metal's jump to an all-time high this month was excessive.
Zinc fell to its lowest in more than two years.
"It's just the case of the market getting too far ahead of itself," said Neil Buxton, managing director of GFMS Metals Consulting.
Tin for delivery in three months closed 11 per cent lower at $21,050 (U.S.) a tonne after slumping as much as 13 per cent, or $3,000.
From the Star's wire services