RTGAM
If the stock market is any indication whether the financial rescue plan floated on Tuesday by Tim Geithner, U.S. Treasury Secretary, will succeed, the answer is no. For now.
Stocks weren't exactly in fine shape before the mid-morning presentation, but turned decidedly weaker the moment Mr. Geithner approached the podium with - as critics are now saying - little to say beyond broad objectives.
The Dow Jones industrial average closed at 7888.88, down 381.99 points, or 4.6 per cent. The broader S&P 500 closed at 827.16, down 42.73 points, or 4.9 per cent, the sharpest one-day dip since Jan. 20.
Although financial stocks were hit particularly hard - with Bank of America Corp. down 19.3 per cent, Citigroup Inc. down 15.2 per cent and JPMorgan Chase & Co. down 9.8 per cent - the selloff was remarkably widespread, leaving few stocks untouched.
Among the 30 stocks in the Dow, all fell. Some of the more defensive names in the index suffered the least, in a relative way, but you wouldn't know it from their severe declines: Procter & Gamble Co. did the best, but fell 2.8 per cent. McDonald's Corp. fell 2.9 per cent and Johnson & Johnson fell 3 per cent.
At the S&P 500, more than 98 per cent of the index's stocks fell, with casualties in every subindex. Financials fell 10.9 per cent over concern that Mr. Geithner's plan was too vague to make a bet on any particular names. But the defensive health care group fell 3.3 per cent and consumer staples fell 3.2 per cent.
Fortunately, the stock market has been more than a touch volatile during official announcements on these sorts of matters in recent months, surging on anticipation of a plan, only to sell off when that plan is revealed - making stock market action for the rest of the week anyone's guess.
In Canada, the S&P/TSX composite index closed at 8817.89, down 229.39 points, or 2.5 per cent. There, a surge in the price of gold - and a modest bump in gold-mining stocks - helped provide some offset to the selloff. Gold rose by $21.40 (U.S.) an ounce, to $914.20, sending Goldcorp Inc. up 2.1 per cent and Barrick Gold Corp. up 0.8 per cent.
However, financials fell sharply, with Royal Bank of Canada down 3.5 per cent and Manulife Financial Corp. down 5.9 per cent. Energy stocks also added to the carnage after the price of crude oil dipped to $37.55 a barrel, down about $2. EnCana Corp. fell 4.4 per cent and Suncor Energy Inc. fell 5.7 per cent.
Copyright 2001 The Globe and Mail
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