Black gold, black day

Market News: After the BellThe close: Black gold, black dayRTGAMYou can argue that India's and China's thirst for energy has not abated one drop with the decline of the U.S. economy. And you can say that analysts and executives have used very conservative estimates for oil prices when forecasting earnings for energy producers.But on a day when crude oil crossed the $120 (U.S.) a barrel threshold on the way down, few investors seemed to be listening.

Oil closed in New York at $119.17 a barrel, down $2.24 and down 19.5 per cent from its record high of $147.27. That put gold on the run as well, since gold is seen as a hedge against inflation, and pricey oil is one of the main causes of inflation.Add it up and it wasn't a good day for the S&P/TSX composite index: It closed at 13,242.2, down 254.33 points, or 1.9 per cent. Energy stocks fell 4.3 per cent, with Suncor Energy Inc. down 6.7 per cent, Talisman Energy Inc. down 5 per cent and EnCana Corp. down 3.9 per cent.Materials stocks, composed largely of gold producers, fell 8.3 per cent.

However, Potash Corp. of Saskatchewan Inc. - another materials stock - was the biggest single drag on the benchmark index. The fertilizer producer, usually a darling of the market when commodities are strong, tumbled 12.8 per cent and accounted for 77.6 points in the index's loss. It used to be the top company in the benchmark index, based on its weighting, but has now fallen to fourth spot.In the United States, major indexes enjoyed their sharpest one-day rally since April, as investors welcomed the lower commodity prices along with greater confidence that the Federal Reserve will not raise interest rates before the end of the year.The Dow Jones industrial average closed at 11,615.77, up 331.62 points, or 2.9 per cent. The broader S&P 500 closed at 1284.88, up 35.87 points, or 2.9 per cent.

The gains were remarkably widespread, with 91 per cent of the stocks in the S&P 500 - and all 10 subindexes - ending the day higher.Even energy stocks and materials stocks rose, despite the drop in crude oil and gold. However, financials and consumer discretionary stocks were the big winners, rising 5.1 per cent and 4.5 per cent, respectively - even though these two sectors were the only two in the index to see their earnings fall in the second quarter. In the third quarter, maybe investors see yesterday's dogs as tomorrows stars.Copyright 2001 The Globe and Mail