Markets love the White House
RTGAM
If you were sitting on the edge of your seat on Friday morning, with visions of double-digit percentage losses at major stock market indexes, you weren't alone. The vote in the U.S. Senate on Thursday night against the $14-billion (U.S.) bailout for the Big Three auto makers triggered scenarios of massive corporate failures and millions of additional job losses - not to mention the potential loss of more U.S. pride and another U.S. city (Detroit).
However, just as the $700-billion rescue plan took a couple of attempts to succeed, investors clued in pretty fast that the auto bailout plan was not about to be shelved without another push. Soon after markets opened with steep, though hardly disastrous, losses, the White House said it would consider helping the auto makers with a slice of the $700-billion rescue plan that was originally earmarked for financial firms.
The markets loved the idea - and were even willing to ignore the other bad news for the day: Bernard Madoff, a former Wall Street icon, had been charged in connection to a $50-billion Ponzi scheme. The Dow Jones industrial average closed at 8629.68, up 64.59 points or 0.8 per cent. The broader S&P 500 closed at 879.74, up 6.15 points or 0.7 per cent.
Although General Motors Corp. shares ended the day down 4.4 per cent, that was a marked recovery from the start of trading, when the shares had been down more than 30 per cent. Ford Motor Co. did even better, rising 4.8 per cent.
In other moves, Intel Corp. rose 5.3 per cent, JPMorgan Chase & Co. rose 3.3 per cent and Citigroup Inc. rose 1.7 per cent.
In Canada, the S&P/TSX composite index closed at 8515.45, up 123.55 or 1.5 per cent. This was an even bigger rebound than in the United States, given that the index began the day down more than 3 per cent. Auto parts manufacturer Magna International Inc. fell a mere 0.2 per cent after being down nearly 12 per cent at the start of trading.
Financials were generally strong, with Royal Bank of Canada up 2.5 per cent and Bank of Nova Scotia up 2.1 per cent. Energy stocks were mixed, after the price of crude oil plunged, then recovered slightly and ended at $46.28 a barrel, down $1.70. Suncor Energy Inc. fell 3.5 per cent and EnCana Corp. fell 0.5 per cent, but Canadian Natural Resources Ltd. rose 2.7 per cent.
Copyright 2001 The Globe and Mail