Positive end to Q1

Mar. 31, 2009 (Baystreet.ca) --

04:26 pm EST Stock markets were up sharply in late trading Tuesday, clawing back big portions of Monday's steep declines as first-quarter trading appeared set to end on an up note.

The surge came despite news of another month of economic contraction in Canada and a disappointing reading on American consumer confidence.

The S&P/TSX Composite Index gained 124.17 points to close the day at 8,720.39

Stocks had retreated after the American and Canadian governments rejected turnaround plans by General Motors Corp. and Chrysler Corp., which raised fears one or both could be headed for bankruptcy.

Since falling to multi-year lows March 9, the TSX's main index is still up about 15% while the Dow industrial average has risen about 17% However, markets are still negative at the end of the first quarter. Toronto is still under water by about 2.6% year to date while the Dow is down about 13%.

Even so, the news on the economic front remains somewhat distressing. Statistics Canada said gross domestic product declined 0.7% during January, on top of a 1% drop in December and a 0.7% slide in November.

The January decline matched expectations "but in what should end up being the country's darkest hour, GDP has dropped at an annualized 9% rate since October," said Avery Shenfeld, chief economist at CIBC World Markets.

"A few more months like that and we would be talking about a depression, but there are reasons to believe that milder monthly retreats lie ahead."

Other data from Statistics Canada showed that the Industrial Product Price Index rose 0.4% in February compared with January. It attributed the modest increase to both the depreciation of the Canadian dollar against its U.S. counterpart and increases in the prices for precious metals and petroleum products.

The TSX financial sector improved as Bank of Montreal improved $1.77 to $33.32 and Manulife Financial headed 48 cents higher to $14.20.

The base metals sector climbed as Teck Cominco Ltd. rose 40 cents to $7.27 and First Quantum Minerals climbed $2.06 to $35.56.

The TSX energy sector was up as Canadian Oil Sands Trust gained $1.81 to $24.95 and Canadian Natural Resources advanced $1.22 to $49.98.

The gold sector advanced, as Barrick Gold Corp gained 55 cents to $41.43.

Air Canada shares descended 17 cents or 16.5% to 98 cents as fears rose that Canada's biggest air carrier may be preparing to file for bankruptcy protection from creditors for the second time in six years.

On Monday, the carrier announced that Montie Brewer had resigned as chief executive and named Calin Rovinescu, a former Air Canada executive who played a key role in the airline's court-supervised restructuring, as his replacement.

The Canadian dollar was up 0.10 cents to 79.33 cents U.S.

ON BAYSTREET

Of the 13 TSX subgroups, 11 finished the day in positive country, led by metals and mining, up 3.4%. Health-care stocks were up 3.3%, followed by real-estate, ahead 2.6%.

The two laggards were telecoms, off 1.3%, and consumer staples, down 0.1%.

The TSX Venture Exchange advanced 11.61 points to 956.81 while the Nasdaq Canada Index tacked on 1.16 points to 448.07

ON WALLSTREET

The Dow Jones Industrials average shot 86.90 points higher by the end of the session to 7,608.92

The S&P 500 index advanced 10.33 points to 797.86, while the Nasdaq gained 26.79 points to 1,528.59.

Stock gains on Wall Street were broad-based, with all but two of the 30 Dow stocks rising.

Dow gainers included IBM. Chevron, McDonald's, 3M, Microsoft and Alcoa.

The Dow's financial components spiked too, continuing the recovery off multi-year lows. Bank of America Citigroup and JPMorgan Chase all gained.

General Motors remained under pressure. On Monday, the Obama administration rejected turnaround plans from GM and Chrysler, saying a bigger overhaul is needed if they want more taxpayer money.

Economically speaking, there was more grim news from the American housing sector as Standard & Poor's/Case-Shiller 20-city housing index tumbled by a record 19% in January from a year earlier. It was the largest decline since the index started in 2000. The 10-city index dropped 19.4%, also a new record.

The Conference Board said its Consumer Confidence Index rose following three consecutive monthly drops, to 26, from a revised 25.3 reading in February, which was itself a big drop from the 37.4 level in January. However, that missed an expected reading of 28.

The Chicago PMI slipped to 31.4 in March from 34.2 in February, missing forecasts for a slight improvement to 34.3.

Treasury prices rose, lowering the yield on the benchmark 10-year note to 2.70% from 2.71% Monday. Treasury prices and yields move in opposite directions.

U.S. light crude oil for May delivery rose $1.49 to $49.90 U.S. a barrel on the New York Mercantile Exchange.

COMEX gold for June delivery rose $7.30 to settle at $925 U.S. an ounce.