Crisis hopping
Out with the credit crisis, in with the economic crisis. That seemed to be the operating mantra of investors on Tuesday after early gains in major stock market indexes gave way to worries about corporate profits in the months ahead.The Dow Jones industrial average closed at 9310.99, down 76.62 points or 0.8 per cent.
The broader S&P 500 closed at 998.01, down 5.34 points or 0.5 per cent.Many financial firms rose spectacularly for the second day in a row as investors grew more confident that the latest attempts to stabilize the financial system will work. The U.S. government announced earlier in the day that it will help capitalize a number of firms by buying preferred shares.
The firms include Goldman Sachs Group Inc., Morgan Stanley, JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc. and Wells Fargo & Co. Citigroup Inc. rose 18.2 per cent and Bank of America Corp. rose 16.4 per cent, but JPMorgan fell 3.1 per cent.Some stocks that appear to be exposed to the economy, however, fell. Most notably, PepsiCo Inc. fell 11.9 per cent after its third-quarter results missed analyst expectations and it announced severe job cuts. It dragged down Coca-Cola Co., which fell 7.5 per cent.
Yes, both stocks are considered to be economically defensive. But the fear is that if Pepsi is suffering, who knows what's happening to more economically sensitive companies.Meanwhile, concerns about Intel Corp.'s third-quarter results sent the shares down 6.2 per cent. However, the chip-maker edged past analysts' predictions when it released its results after markets closed. Intel reported earnings of $2-billion (U.S.), or 35 cents a share, a 12 per cent increase over last year.
The shares rose 4.3 per cent in after-hours trading.In Canada, the S&P/TSX composite index closed at 9955.66, up 890.5 points or 9.8 per cent. The Toronto market was closed on Monday for the Thanksgiving Day holiday. But if you take both Monday and Tuesday into account, the Dow has risen 10.2 per cent in total, which is roughly in line with the one-day return for the Canadian benchmark index.Among energy producers, Talisman Energy Inc. rose 23.4 per cent and Suncor Energy Inc. rose 11.1 per cent. Among financials, Royal Bank of Canada rose 14.6 per cent and Bank of Montreal rose 12.5 per cent. Manulife Financial Corp. rose 14.5 per cent after the company reassured investors that its capital resources were more than adequate.
Meanwhile, Research In Motion Ltd. rose 9.4 per cent. BCE Inc. rose 2.6 per cent - although the stock is still more than 20 per cent below the agreed-upon takeover price for the telecommunications giant, suggesting that investors are still not convinced that the money needed to complete the deal in December will be available.
Copyright 2001 The Globe and Mail