The streak dies
RTGAM
So much for the recent winning streak that had been promising to put a bullish spin on North American stocks. On Thursday, major indexes handed back most of the gains won during Wednesday's upbeat session and put an end to four consecutive days of higher closes.
The setback will also likely make January a writeoff for the stock market, with just one trading day left in the month to erase substantial losses so far this year.
The Dow Jones industrial average closed at 8149.01, down 226.44 points, or 2.7 per cent. The broader S&P 500 closed at 845.14, down 28.95 points, or 3.3 per cent. The index is down 6.4 per cent this year.
Clearly, investors are willing to do 180-degree turns on financials these days. On Wednesday, they entertained hopes that the U.S. government will soon create a so-called bad bank to absorb the toxic assets of struggling financial firms, leaving their balance sheets healthier and making the companies more likely to lend money.
On Thursday, a report showed that new-home sales plunged 14.7 per cent in December, dashing hopes for a recovery in the devastated U.S. housing market - which is key to stability in the financial sector. As well, tumbling durable goods orders suggested that the demand for big-ticket items continues to crumble
Needless to say, financials led the selloff, with Bank of America Corp. down 8.3 per cent and Citigroup Inc. down 7.4 per cent. Wells Fargo & Co., which had surged more than 30 per cent on Wednesday, sank 11.4 per cent on Thursday.
However, the selloff was widespread, with 27 of the 30 names in the Dow falling. General Motors Corp. fell 7 per cent after Ford Motor Co. reported a fourth-quarter loss of $5.9-billion (U.S.)., General Electric Co. fell 5.8 per cent and Pfizer Inc., which recently made moves on Wyeth in a $68-billion deal, fell 2.1 per cent.
In Canada, the S&P/TSX composite index closed at 8762.76, down 143.47 points, or 1.6 per cent. Financials were among the biggest drags on the index, with Manulife Financial Corp. down 6.1 per cent, Toronto-Dominion Bank down 5.7 per cent and Royal Bank of Canada down 4.3 per cent. Energy stock were also generally weak, despite the price of crude falling only slightly, to $41.44 a barrel. Suncor Energy Inc. fell 4.1 per cent and EnCana Corp. fell 3.6 per cent.
Among the winners: Gold producers surged, following a spike in the price of gold to $906.50 an ounce, up $16.50, as investors sought refuge from the rest of the stock market. Barrick Gold Corp. rose 7.2 per cent and Goldcorp Inc. rose 6.9 per cent.
Copyright 2001 The Globe and Mail