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Metals weigh TSX down
Apr. 16, 2010 (Baystreet.ca) --
The Toronto stock market was sharply lower Friday with financial shares a weight after U.S. federal regulators filed civil fraud charges against Goldman Sachs over its dealings in the subprime mortgage market. The S&P/TSX Composite Index had tumbled 140.86 points, or 1.2%, to 12,070.66, a drop of 106.18 points or 0.9% on the week. The TSX financials sector fell as Royal Bank backed away 55 cents to $60.82 and Manulife Financial declined 21 cents at $19.50. Commodity stocks also depressed the TSX fell as investors flocked to the perceived safe-haven status of the U.S. dollar following the Goldman announcement and new developments in the Greece debt crisis. On the TSX, the energy sector moved down and Suncor Energy gave back 73 cents to $34.08 and Canadian Natural Resources lost $1.95 to $76.86. The gold sector was down as Goldcorp Inc. faded 64 cents to $39.50 and Barrick Gold Corp. was down 60 cents to $39.54. The base metals sector slipped as May copper dropped eight cents at $3.52 U.S. a pound. Teck Resources lost $1.79 to $42.90. The industrials sector also made a dent in the market with Canadian Pacific Railway down 57 cents to $58.45. In other corporate news, shares in drug developer Aeterna Zentaris Inc. tumbled 35 cents or 21% to $1.31 after it said Thursday that it has deal to raise $15 million U.S. in a registered direct offering. The drug developer said it will sell 11.1 million shares to a group of institutional investors at $1.35 per share and issue warrants to acquire 4.4 million shares at an exercise price of $1.50 per share. Air Canada gained seven cents to $2.45 after an analyst at Raymond James Financial Inc. raised his rating on the carrier to "strong buy" from "outperform." He also promoted WestJet to "outperform" from "market perform" but its shares dipped 19 cents to $13.61 after U.S. carrier Southwest Airlines announced that it was dropping plans to sell travel to Canada in a partnership with the Calgary based firm. Southwest said Friday it pulled out after WestJet asked for changes in the agreement that the two reached back in 2008. Shares in green power firm Finavera Renewables Inc. jumped three cents or 26% to 14.5 cents after it adopted a shareholder rights plan to guard against unwanted takeover bids after it received inquires about a possible acquisition of the company. In economic news, Statistics Canada said manufacturing sales edged up 0.1% to $ 44.10 billion in February, with most of the sales increases in Western Canada and Ontario. Analysts were expecting the sales to edge up by 0.8%. The agency also said new motor vehicle sales increased 8.1% to 138,336 units in February. The Canadian dollar dipped 1.01 cents to 98.69 cents U.S. ON BAYSTREET All but of the 14 TSX subgroups lost ground on the day. Metals and mining weighed heaviest, losing 2.5%, while energy stocks sagged 2% and global base metals sank 1.9%. The two gainers were health-care stocks, up 1.2% and information technology issues, up 0.5%. The TSX Venture Exchange skidded 12.66 points to 1,666.84, while the Nasdaq Canada index tumbled 16.06 points to 792.75. The Venture exchange lost 13.73 points or 0.8% on the week. ON WALLSTREET In New York, the financial sector led a broader stock market selloff Friday after U.S. regulators charged Goldman Sachs with defrauding investors by not telling them about conflicts of interest in subprime investments it sold. The Dow Jones industrial average faded 125.91 points, or 1.1%, to 11,018.66. The big board managed, however, to gain 21.31 points, or 0.2%, on the week. The S&P 500 index lost 19.54 points to 1,192.13, finishing down 2.24 points on the week. The Nasdaq composite slipped 34.43 points to 2,481.26. The tech-heavy index managed, however, to finish up on the week by 27.21 points or 1.1%. The news overshadowed strong quarterly results from Google, General Electric and Bank of America. News that the Securities and Exchange Commission (SEC) has charged Goldman Sachs with fraud sent the firm's shares down 12% and also dragged on the broader financial sector. The KBW Bank sector index lost 3.5%. Citigroup, Morgan Stanley and JPMorgan Chase all declined. One expert said investors are trying to understand if Goldman is just the tip of the iceberg and if more companies are involved. They also want to know whether more agencies than just the SEC will become involved and what this is going to mean for the financial sector going forward. However, stocks have also not seen a notable selloff in nearly two months and were perhaps primed for a retreat, the strategist said. Goldman Sachs provided the catalyst. The Dow, Nasdaq and S&P 500 have all risen for seven of the last eight weeks. As of Thursday's close, all three were set to end higher for another week, but with Friday's weakness, only two out of the three managed to do so. The SEC charged Goldman and a vice president, Fabrice Tourre, with failing to disclose conflicts of interest related to a sale of mortgage-related securities that caused two European banks to lose almost $1 billion. Goldman client Paulson & Co. helped put together an investment offering of mortgage-related securities the hedge fund thought would lose value. Separately, Paulson took out a type of insurance that let it reap huge profits when those securities tanked as the housing market collapsed. But Goldman didn't tell other clients that Paulson was betting on the offering falling apart. Stocks seem to cut losses after the SEC said it was not pursuing charges against Paulson, Schrader said, as this seemed to reduce fears of a broader crackdown. The charges came as lawmakers investigate practices and complex investments that helped cause the financial crisis. Investors had a sour response to improved quarterly results from a trio of top-tier companies. General Electric reported first-quarter earnings that fell from a year earlier, but topped estimates, on revenue that fell from the prior year and missed estimates. GE said it is expecting earnings growth for the rest of the year, but that more cost-cutting measures may be needed to drive further growth. Shares of the Dow component fell 3%. Bank of America reported a quarterly profit of $3.2 billion U.S., up from a year ago and easily beating analysts' forecasts. Late Thursday, Google reported higher quarterly earnings and revenue that easily beat expectations, thanks to a recovering advertising market. But investors took a "sell the news" approach and Google's stock fell 6% Friday. On the economic front, the University of Michigan's consumer sentiment index slipped to 69.5 in mid-April from 73.6 earlier in the month. The reading was a surprise to economists, who forecast it would rise to 75. Elsewhere, the U.S. Commerce Department said the number of building permits issued during March, considered a gauge of future construction activity, rose 7.5% to a seasonally adjusted annual rate of 685,000 from February's revised 637,000 rate, which was much more than expected. The March tally was the highest since October 2008, when 729,000 permits were issued. Permits were up 34.1% versus March 2009. Housing starts rose to an annual rate of 626,000 during the month, up 1.6% from February's revised rate of 616,000. Housing starts were up 20.2% from the 521,000 rate in March 2009. March housing starts were the highest since November 2008 and were better than forecast. Economists had expected housing starts to increase to an annual rate of 610,000. Prices for U.S. Treasurys shot up sharply, with the yield on the 10-year note falling to 3.77% from Thursday's 3.85%. Bond prices and yields move in opposite directions The price of a barrel of oil tanked $2.53 to $82.98 U.S. Gold prices jettisoned $23 to $1,137 U.S. an ounce.