Pescod says

Friday is one of those days

At noon: Oil, the new bear

Friday, August 08, 2008
Friday is one of those days when it pays to overlook the carnage in Canada and instead focus on those money-losing investments in the United States, which are now looking up.
The S[amp]amp;P/TSX composite index was down 78 points, to 13,307, at midday – an improvement from more severe losses at the start, but still a dismal showing after you factor in the lower Canadian dollar. The loonie fell below 93.7 cents (U.S.), down 1.3 cents as the U.S. dollar took flight against a number of global currencies.

Among Canadian stock market subindexes, materials were the biggest drag, falling 3 per cent thanks to a poor showing from Potash Corp. of Saskatchewan Inc. and a number of gold producers. Potash Corp. fell 3.2 per cent and Barrick Gold Corp. fell 1.9 per cent. Gold traded at $855 an ounce, down $18 – representing a 15 per cent decline from its record high this year.

Meanwhile, Canada's energy subindex fell 2.8 per cent, with the price of crude oil falling further into bear market territory, defined as a drop of 20 per cent or more. Oil traded at $116.13 a barrel, down $3.89, or 21 per cent, below its high. The recent decline has erased all of the gains since early May.

In the United States, though, the surging dollar and plunging price of oil have been good news for the stock market. The Dow Jones industrial average rose 195 points, to 11,626. The broader SP 500 rose 17 points, to 1283.

There, economically sensitive consumer discretionary stocks led the way, up 3.8 per cent. Energy-sensitive industrials rose 2.7 per cent. However, the gains were widespread: 82 per cent of the stocks in the S[amp]amp;P 500 were in positive territory, while 27 of the 30 stocks in the
Dow were up.

© Copyright The Globe and Mail

Schachter says...

Banks Dive In USA

The close: A good bank is hard to findRTGAMNorth American stocks were hit hard on Thursday after investors grew increasingly nervous about financial earnings and the state of consumer spending after major U.S. chains released dismal statistics on same-store sales.The Dow Jones industrial average closed at 11,431.43, down 224.64 points, or 1.9 per cent. The broader S&P 500 closed at 1266.10, down 23.09 points, or 1.8 per cent. In Canada, where investors followed the U.S. lead, the S&P/TSX composite index closed at 13,385.17, down 68.34 points, or 0.5 per cent, despite rising energy stocks.Financial stocks began the day as the biggest drags on the stock market and finished that way, too, a day after American International Group Inc. announced a whopping second-quarter loss that reignited wider concerns about writedowns, slashed dividends and equity requirements within the financial sector.AIG plunged 18.1 per cent - the biggest one-day loss in its nearly 40-year history as a public company, according to Bloomberg News - and dragged down just about every insurer and bank in its wake. Citigroup Inc. fell 6.2 per cent, Lehman Brothers Holdings Inc. fell 13.6 per cent and Fannie Mae fell 14.2 per cent, blowing big holes in the recent impressive rebound in financial stocks.In Canada, the Big Banks and major insurance companies were also the biggest laggards. Royal Bank of Canada fell 3.2 per cent, Bank of Nova Scotia fell 2.6 per cent and Manulife Financial Corp. fell 3.4 per cent.Meanwhile, Wal-Mart Stores Inc. fell 6.3 per cent - just one day after hitting a four-year high, when investors considered it a safe stock - after the world's largest retailer handed investors evidence that it, too, could be a victim of slower U.S. economic growth. Sales at stores open for at least one year are expected to rise between 1 and 2 per cent in August, well below expectations.Earlier, investors had been operating under the belief that Wal-Mart and a number of other discount retailers were likely to profit from the U.S. economic downturn, since strapped consumers tend to seek better deals lower down the retail food chain. That belief has now been shredded.Copyright 2001 The Globe and Mail