The Dow Jones industrial average closed at 7761.60, up 152.68 points, or 2 per cent. The broader S&P 500 closed at 811.08, up 13.21 points, or 1.7 per cent.
While those increases may not look particularly impressive, they marked a big improvement over substantial losses at the start of trading. Then, indexes fell as much as 1.9 per cent - so let's call it a 3.5 per cent round trip, from the trough to the day's end - after a report on non-government payrolls showed job losses of 742,000 in March, 92,000 worse than economists had been expecting and a troubling setup for the official Labour Department numbers on Friday.
Then, the ISM Manufacturing index for March turned out slightly better than expected, though still well below the expansion threshold. In other words, manufacturing isn't contracting as sharply as it once was.
As well, pending home sales rose 2.1 per cent in February, beating the consensus forecast. For bullish investors, this was further confirmation that the U.S. economy has bottomed out, sending stocks higher in anticipation of solid evidence down the road.
At the Dow, 28 of the index's 30 components ended the day higher. Among the big movers, American Express Co., Citigroup Inc. and JPMorgan Chase & Co. rose 5.9 per cent each. Microsoft rose 5.1 per cent. The two losers: General Motors Corp. fell 0.5 per cent and Boeing Co. fell 0.4 per cent.
In Canada, the S&P/TSX composite index closed at 8941.82, up 221.43 points, or 2.5 per cent - marking a similarly impressive 3.8 per cent rebound from the day's lows. All three of the index's major sectors - materials, energy and financials - moved higher.
Among financials, Manulife Financial Corp. rose 6.2 per cent and Bank of Nova Scotia rose 3.4 per cent. Barrick Gold Corp. rose 4.9 per cent, despite a modest uptick in the price of gold.
As well, energy stocks moved higher even as the price of crude oil dipped to $48.39 (U.S.) a barrel, down $1.27. EnCana Corp. rose 3.8 per cent and Suncor Energy Inc. rose 1.5 per cent.
Copyright 2001 The Globe and Mail
| GM Canada back to No. 1 Auto maker regains top sales spot in March despite 17 per cent decline; Chrysler sales plummet 27 per cent 1:54 PM |
| Recession likely to drag, Carney warns But Bank of Canada governor questions the need for more government stimulus 2:22 PM |
| Protesters storm the banks Thousands jam London's financial district, break windows, scrawl graffiti 3:34 PM |
| Abitibi debt restructuring bid fails Inability to win deal heightens possibility the company may be forced to seek court protection from its creditors 12:31 AM |
 Inside the coup at Air CanadaTroubled airline formed plans to oust CEO as it announced $1-billion loss in February 1:00 AM |
| Total sells part of oil sands stake to Sinopec Companies now are equal owners of Northern Lights project in Alberta 3:49 PM |
| CP sells most of Detroit River tunnel holdings Borealis, a division of OMERS and the railway's bridge ownership partner, pays $110-million for the stake 11:08 AM |
| Stocks rebound after early losses Pending home sales, construction spending give markets a lift 11:16 AM |
| U.S. airline grounds Bombardier jets Atlantic Southeast re-inspecting regional aircraft as a precaution 8:07 AM |
| U.S. manufacturing activity shrinks in March Sector decline continues for 14th straight month 10:47 AM |
| Kaboose founders sell the firm Family-oriented online company raising $120-million in two chunks; North American business bought by Disney Online 1:22 PM |
| |
Suddenly, hope is busting out all over. Almost every day (okay, last Friday was an exception) seems to bring a little good news, cheering stock markets and instilling some optimism in consumers. That's great. I just hope it's real.
The mood swing really began when the U.S. Federal Reserve Board announced on March 18 that it will spend up to $1.75-trillion (U.S.) this year to buy mortgage-backed securities and U.S. Treasury notes "to provide greater support to the mortgage lending and housing markets". That translates into a huge cash infusion into the American economy and while that may lead to inflation down the road, it's a move that may forestall the deflationary spiral that was looming. Stock markets applauded.
On March 23, the applause turned to cheers when embattled Treasury Secretary Tim Geithner released details of a plan to combine with the private sector to purchase up to $1-trillion worth of bad loans from U.S. financial institutions.
As that was happening, Suncor and Petro-Canada announced a mega-merger that dramatically changes the dynamics of the oil patch and may open the door to a tidal wave of M&A activity in the West. Energy trusts, facing the imposition of the new trust tax in less than two years, could be a prime focus in this situation.
Then there were the statistics. Canadian inflation showed a modest increase. Sales of existing homes in the U.S. recorded a surprising 5.1 per cent jump in February while new home sales were up 4.7 per cent from January. Factory orders in the States were up 3.4 per cent last month. It was the largest gain in over a year and defied economists' expectations. (However, the fact that the driving force behind the numbers was a 32.4 per cent gain in orders for military aircraft and parts raises the question of whether this was a turnaround or merely a blip.)
All of this has prompted some investors to get off their backsides and start pumping some of their cash back into stocks. As I write, with only two trading days left in the month, the S&P/TSX Composite Index is up 8.6 per cent for March while the Dow is ahead by 10.1 per cent and the S&P 500 by 11 per cent.
So is the worst really over? For the TSX, the answer is maybe but only in the sense that the March 6 intraday low of 7,480 may have been the bottom for this cycle. I'm not as optimistic about the U.S. indexes, however.
In his March 24 prime time press conference, President Barack Obama, who has emerged as the world's Cheerleader of Hope, did his best to instill confidence in Americans by saying he is seeing signs of progress in the economy. But he quickly tempered that by warning there is still a high hill to climb and urging an increasingly balky Congress to approve his budget.
Here at home, we've been hearing a similar message from former Bank of Canada Governor David Dodge who has no axes to grind and can speak his mind freely now that he is out of office. He repeated again last week that it will take "years" before the global economy returns to pre-crash levels, warning that 2009 will be "a very dark page in the economic history of the world".
That's sobering stuff and it should remind investors not to become overly ebullient quite yet. There are still many shocks to come and we would be wise to expect stock market volatility to continue through the spring and summer. Don't sell those bonds yet!
In fact, rallies such as the one we saw in March are a good time to review your portfolio and see if it is time to make some changes. Many of those beaten-down stocks you've been clinging to have probably gone up in value. Ask yourself whether you want to continue holding them at this stage. There may be more attractive opportunities out there or you may want to become more defensive by building cash or adding quality bonds or preferred shares to your mix. (The banks continue to flood the market with new issues of high-yielding preferreds.)
Hope is a wonderful emotion – it keeps us going even in the darkest times. But investors must temper it with reality and the reality right now is that we still have a long way to go before economic stability is restored.
Gordon Pape's latest book is Tax-Free Savings Accounts: A Guide to TFSAs and How They Can Make You Rich. Buy your copy at 27 per cent off the suggested retail price by going to http://astore.amazon.ca/buildicaquizm-20
Posts
