Bernanke, Countrywide boost stocks
RTGAM
Stock markets rose Thursday as investors speculated the U.S. may cut interest rates and a report suggested Bank of America Corp. is close to buying struggling Countrywide Financial Corp.
Shares of Countrywide, the largest U.S. mortgage lender, surged 51 per cent after several media reports said Bank of America was in advanced talks to buy it. Countrywide has been hit hard by the U.S. housing slump, with foreclosures and late payments on home loans rising to records in December.
U.S. Federal Reserve boss Ben Bernanke also played a hand in the market optimism after he promised to keep slashing interest rates to keep the U.S. economy from being shoved into recession by housing and credit woes.
"In light of recent changes in the outlook for and the risks to growth, additional policy easing may be necessary," Mr. Bernanke said. "We stand ready to take substantive additional action as needed to support growth and to provide adequate insurance against downside risks."
Economists welcomed the Fed Chairman's words, especially given mounting concerns that the U.S. economy is headed for - or already is in the grips of - a recession.
"Bernanke gave about as clear a signal as possible in his speech on Thursday ... no special Fed decoder ring needed there," said Sherry Cooper, chief economist at BMO Nesbitt Burns Inc.
The S&P/TSX composite index climbed 62.69 points to 13,642.63, with the mining and gold sectors adding ground as bullion prices surged.
Canada's big banks were among the day's biggest risers, with Bank of Nova Scotia up 3.4 per cent, Canadian Imperial Bank of Commerce adding 3.4 per cent, Royal Bank of Canada up 2.2 per cent and Toronto-Dominion Bank up 1.8 per cent.
On Wall Street, the Dow industrials closed 117.78 points higher at 12,853.09. In the broader U.S. market, the Nasdaq climbed 13.97 points while the S&P 500 rose 11.20 points.
With files from wires.
Copyright 2001 The Globe and Mail
Thursday, January 10, 2008
Stock markets rose Thursday as investors speculated the U.S. may cut interest rates
Wednesday, January 9, 2008
Oil Rises U.S. data shows crude inventories drop, but gasoline stocks up
NEW YORK – Oil prices rose today after a U.S. government report showed crude oil stockpiles fell for the eighth consecutive week but gasoline supplies swelled.
Fears of further violence in Nigeria, the world's eighth-largest oil producer, also supported prices.
Crude inventories fell by 6.8 million barrels, or 2.3 per cent, to 282.8 million barrels during the week ended Jan. 4, the Energy Department's Energy Information Administration said in its weekly report.
The drop was more than eight times the 800,000 barrels analysts predicted, according to a survey by Dow Jones Newswires. However, gasoline inventories beat expectations, rising sharply by 5.3 million barrels, or 2.6 per cent, to 213.1 million barrels. Analysts forecast stockpiles would climb by only 1.6 million barrels last week.
"This was really a mixed report, not a bullish report," said Tim Evans, an analyst at Citigroup Inc. in New York.
Contributing to the drop in crude oil stocks were efforts by Gulf Coast refineries to minimize their inventories, which are subject to year-end taxes, he said. Crude supplies also tend to rebound early in the year, he said.
"When we have weak gasoline demand, as we do now, and when we have swelling gasoline inventories, as we do now, it's hard to make the case that the overall petroleum market is critically tight," Evans said.
Light, sweet crude for February delivery added $1.36 to US$97.69 a barrel on the New York Mercantile Exchange.
Gasoline prices in the United States climbed 0.66 cent to $2.4805 a gallon.
At the pump, gas prices dipped 0.1 cent overnight to a national average of about $3.10 a gallon today, but remain well above the year-ago average of $2.30 a gallon, according to AAA and the Oil Price Information Service. The Energy Information Administration on Tuesday said gas prices are expected to average more than $3 a gallon through 2009 and peak near $3.50 this spring.
In London, February Brent crude rose $1.04 to $96.58 a barrel on the ICE Futures exchange.
The weekly report also showed that inventories of distillate fuel, which includes diesel and heating oil, rose by 1.5 million barrels to 128.7 million barrels. Analysts had expected a drop of 300,000 barrels.
Heating oil futures rose by 3.06 cents to $2.6669 a gallon. Natural gas prices jumped 11.5 cents, selling at $8.082 per 1,000 cubic feet.
U.S. refineries ran at an average 91.3 per cent of total capacity, an increase of 1.9 percentage points, beating the expected 0.1 percentage point gain, the report said.
Reports that Nigerian militants are planning attacks on the nation's oil facilities also sent prices higher. In a research note, Vienna's PVM Oil Associates noted that the country had "already lost some 15 per cent of crude output capacity" due to violence. Still it forecast increased production of around 2.35 million barrels a day for this year, up from last month's 2.22-million barrel daily output.
Oil was also being supported by a surge in the price of gold, analysts said. Gold futures surged above $880 an ounce Tuesday to their highest level ever, not accounting for inflation.
A monthly EIA report Tuesday predicted oil supplies will be tight this year but ease in 2009. The EIA predicted oil prices will average $87 a barrel this year, up from a previous estimate of $85. The average price will then fall to $82 a barrel in 2009, it said.
A barrel of light, sweet crude surpassed $100 a barrel on the New York Mercantile Exchange for the first time last week.
Canada A slowdown, but no recession?
OTTAWA — Canada and the U.S. are heading for the worst economic performance in five years and may already be in the midst of a mild recession, says a report from an economic forecasting group.
Global Insight Canada has increased the chances of Canada experiencing a recession during the first half of 2008 — two consecutive quarters of negative growth — to 25 per cent.
The chances of the U.S. being in a slump during the same period are even greater, at 40 per cent, the economic forecasting firm said today.
While the report still forecasts both economies to stay above water — if barely — Global Insight’s managing director Dale Orr said last week’s “quite discouraging” employment numbers in the U.S. and weaker industrial production make “us more concerned than we were a month ago.”
On Friday, the U.S. reported that hiring practically stalled in December, driving the country’s unemployment rate up to a two-year high of five per cent. Canada’s next jobs report will be released Friday.
Global Insight says the most likely scenario is that Canada’s economy will grow 2.2 per cent this year, a little better than the U.S.’s 1.9 per cent. Both would be the worst economic performances since 2003.
In that forecast at least, the Toronto-based firm is in line with views presented by Canada’s five big banks at the annual outlook breakfast at the Economic Club of Toronto today.
Economists from the banks agreed that while Canada’s economy will slow from last year’s anticipated 2.8 per cent advance, the retreat won’t be all the way to the negative side.
But Global Insight also argues that the chances of what it calls the “pessimistic scenario” becoming reality are increasing. That would happen if the U.S. housing and financial sectors, already hit hard by the subprime mortgage crisis, weaken further, business productivity and investment slows, and oil prices remain at record levels.
“In this scenario, the U.S. economy declines by 1.7 per cent in the first quarter, 0.5 per cent in the second quarter and moves up to no growth in the third quarter of 2008,” the report says.
Canada will be sideswiped by such a development south of the border, the report says, because of lower demand for exports of softwood lumber, autos and auto parts, resulting in higher unemployment to 6.2 per cent from the current 5.9 per cent.
Even in the pessimistic scenario, however, Canada does not fall into recession, although growth will be microscopic in the first half of 2008 and only reach 1.4 per cent for the year as a whole. The 25 per cent risk of a Canadian recession is based on the U.S. economy performing worse than in the pessimistic scenario.
“If a person wants to be an optimist and think there will be no recession, they can be,” said Orr. “But if you want to be a pessimistic, there is evidence there to support that view as well.”
Orr notes that the odds of Ontario, Canada’s manufacturing heartland, falling into a recession this year are the same as the U.S. at 40 per cent because of the province’s disproportionate dependence on exports.
But even Alberta would suffer under the pessimistic scenario, due to reduced demand in the U.S. for its energy exports.
MARKET SNAPSHOT: U.S. Stocks Down Again As Market Mulls Earnings Ahead
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| January 9, 2008 1:49pm ET |
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By Kate Gibson
U.S. stocks bounced around Wednesday as a recession forecast from Goldman Sachs and concern about profit reports ahead offset cheer fueled by a raised 2008 forecast from chemicals giant and Dow industrials component DuPont.
"It is going to be tough to spot bargains when the tone for the U.S. economy and financial stocks is this negative," said Kevin Giddis, fixed-income trading managing director with Morgan Keegan & Co. Inc.
But given the increasingly negative sentiment, a turnaround could be close, Giddis said.
"The recent data suggest that the U.S. economy is falling into recession," Goldman Sachs said in a note early Wednesday, in which it also predicted the Federal Reserve would cut interest rates further in response.
The Dow Jones Industrial Average (DJI) was off 39.4 points at 12,549.7, with 19 of its 30 components trading lower. General Motors Corp. (GM) fronted the blue chip bleeding, its stock off 5.1%.
The Dow's financial stocks also fared poorly, with JPMorgan Chase (JPM) down 1.8% and Citigroup Inc. (C) off 1.7%.
The index's biggest gainers included E.I. du Pont de Neumours & Co. (DD), which gained 4.7%. .
The S&P 500 (SPX) fell 3.68 points to 1,386.51, while the Nasdaq Composite (RIXF) dropped 13.76 points to 2,426.75.
Heavy metal
On the New York Mercantile Exchange, gold futures edged higher after surging to a new record high of $894.40 in electronic trading early on. .
Crude-oil futures reversed earlier losses after news that U.S. inventories had declined for an eighth week, with crude for February delivery recently up 60 cents at $96.93 a barrel. .
Volume on the New York Stock Exchange topped 1 billion shares, and declining stocks ran ahead of those advancing nearly 2 to 1. On the Nasdaq, more than 1.5 billion shares exchanged hands, and decliners beat advancers 2 to 1.
As economic worries roiled the equities market, the Bush administration was reportedly considering a rebates and tax breaks to stimulate the economy. .
St. Louis Federal Reserve President William Poole offered a more optimistic view of the economy in an address early Wednesday, predicting a recession would be avoided. .
Federal Reserve Chairman Ben Bernanke is slated to speak Thursday.
Tuesday's washout
On Tuesday, fears that Countrywide Financial would file for bankruptcy -- denied by the mortgage lender -- and AT&T's pessimistic outlook triggered a renewed battering for U.S. stocks, with the Dow industrials falling 238 points, the Nasdaq Composite dropping 58 points for its eighth consecutive fall, and the S&P 500 losing nearly 26 points.
Countrywide (CFC) stock, which on Tuesday fell 8.8%, declined further Wednesday, and was recently down 15%.
"Housing is driving the bus right off the cliff and taking most financial-related companies with it," said Giddis.
For the Dow Jones Wilshire 5000, which lost 266.64 points or 1.8%, Tuesday's close capped the worst five-day start of a year in nearly three decades, with the index down 5.78%, or $1.0 trillion, so far this year.
The bell tolls
After the close of trade, Alcoa (AA) is expected to report a 55% drop in earnings per share, excluding restructuring charges.
Shares of Alcoa were off 1.8%. .
E-Trade Financial (ETFC) jumped 1.3% after saying it will exit its institutional trading desk and that it sold $3 billion in available-for-securities, taking a loss of less than $5 million.
And, shares of MBIA (MBI) fell 13.3% after the bond insurer said it was slashing its quarterly dividend from 34 cents to 13 cents to strengthen its capital.
Overseas, European shares touched a 15-month low, as dismal quarterly sales from one British retailer heightened worries about consumer spending trends. .
In Asia, several markets rebounded from early lows amid bargain-hunting. .
(END) Dow Jones Newswires 01-09-08 1348ET Copyright (c) 2008 Dow Jones & Company, Inc. |
