U.S. recession is grinding to a halt and growth will resume later this year

After the Bell


The close: A down Legg

RTGAM The good news? Ben Bernanke, Chairman of the Federal Reserve, believes the terrible U.S. recession is grinding to a halt and growth will resume later this year. The bad news? The recovery will be slow.


While that assessment would have been enough to send stock markets soaring a couple of months ago when it seemed as though the U.S. economy was teetering on the edge of the abyss, these are different times. The stock market has already discounted a retreat from the abyss, and some observers believe it has begun to price in a decent recovery now that the S&P 500 has bounced about 35 per cent above its 12-year low in early March.


In other words, investors merely shrugged off Mr. Bernanke's upbeat assessment on the economy, leaving U.S. stocks down slightly for the day after a strong rally on Monday.


The Dow Jones industrial average closed at 8410.65, down 16.09 points, or 0.2 per cent. The broader S&P 500 closed at 903.80, down 3.44 points, or 0.4 per cent - within a breath of where it began the year.


Intel Corp. fell 3 per cent and Procter & Gamble fell 2.4 per cent. As well, money management firm Legg Mason Inc. fell 17.3 per cent after it reported a wider-than-expected loss in its quarterly results and cut its dividend. However, Kraft Foods Inc. rose 4 per cent after investors applauded the company's first quarter results.


Financials were mixed, as investors await the results of government stress tests, due to be released on Thursday. Bank of America Corp. rose 4.4 per cent but JPMorgan Chase & Co. fell 2.7 per cent.


In Canada, the S&P/TSX composite index closed at 9880.72, up 10.35 points, or 0.1 per cent.


Financials were generally strong, with some of the higher-yielding names reporting the best gains. Bank of Montreal, the one deemed most likely to trim its dividend during the worst stretch of the bear market earlier this year, rose 4.3 per cent. At the other end of the spectrum, Royal Bank of Canada rose just 0.4 per cent.


Linamar Corp. surged 39.4 per cent after the auto parts maker reported a smaller-than-expected loss for its quarterly results.


However, energy stocks were weak after the price of oil retreated below $54 (U.S.) a barrel, down 63 cents. Suncor Energy Inc. fell 1.4 per cent and Canadian Oil Sands Trust fell 2 per cent.

Copyright 2001 The Globe and Mail


Toronto Most Actives At 4:15 PM EDT

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A refreshing pause?

A refreshing pause?

RTGAM

Global stock market indexes struck a cautious note on Tuesday morning after a strong rally on Monday sent major indexes to multi-month highs over enthusiasm for an economic rebound.


U.S. stock index futures were down with about an hour before markets open, suggesting that stocks will dip slightly at the start of trading. Futures for the Dow Jones industrial average were down 22 points. Futures for the broader S&P 500 were down 4 points - threatening to put it back below the 900 threshold and perhaps back into negative territory for the year, one day after poking into the black for the first time since January.


In Europe, the U.K.'s FTSE 100 was up 2.5 per cent in afternoon trading, after the stock market there was closed on Monday. Germany's DAX index fell 0.5 per cent. In Asia, Japan's stock market was closed, but Hong Kong's Hang Seng index rose 0.3 per cent in overnight trading.


Corporate news was mixed. Financial firm UBS AG announced a $1.8-billion (U.S.) quarterly loss and maintained a cautious outlook due to a worsening economy. However, Kraft Foods Inc.'s first quarter earnings jumped 10 per cent.


Bloomberg News is reporting that the U.S. government's stress tests on financial firms is likely to conclude that 10 of the 19 firms in the study will need additional capital to keep them safe from a deeper-than-expected recession. Results are due to be released officially on Thursday.


In the meantime, investors will be anticipating Ben Bernanke's testimony before the Joint Economic Committee, where the Federal Reserve chairman will discuss recent attempts to get banks lending again and efforts to stimulate the economy - pertinent stuff, with the stock market anticipating an economic recovery.


In Canada, Loblaw Cos. Ltd. reported a 73 per cent jump in its first quarter earnings. Adjusted earnings, which ignore one-time factors, were 47 cents a share, well above the 35 cents a share than analysts had been expecting.

Copyright 2001 The Globe and Mail