Markets fall despite financials pledge

Feb. 10, 2009 (Baystreet.ca) --

12:29 pm EST The good vibes for North American stocks seemed to have faded by midday on Monday, as sentiment turned against a pledge by U.S. regulators to do whatever it takes to support the American financial system..

The S&P TSX Composite Index had slumped 79.16 by noon to 7,870.83,

Canadian investors also took in a major deal as Nova Chemicals Corp. has agreed to be bought out for $2.3 billion U.S. by Abu Dhabi-based International Petroleum Investment Co.

Shares in Nova Chemicals plunged to a new low earlier this month as traders assessed heavy losses and looming financing deadlines in a deepening recession but soared $5.08 or 306% to $6.74 in Monday trading.

Canada's big banks are preparing to report their first-quarter earnings for 2009 starting this week and Warne said expectations are fairly minimal.

TD Bank, which reports Wednesday, was ahead 43 cents to $33.68 but Manulife Financial moved down 11 cents to $13.01.

The energy sector was also flat, off its best levels of the morning as gains in crude prices reversed.

Canadian Natural Resources improved 52 cents to $38.78 but EnCana Corp. gave back 57 cents to $47.70.

The base metals sector was the leading advancer, with Teck Cominco Ltd. ahead 15 cents to $3.95 and HudBay Minerals climbed 31 cents to $4.98.

The gold sector was the leading decliner as Barrick Gold Corp. faded $1.28 to $44.80.

Shares in Iamgold Corp. added three cents to $10.73 after the company said proven and probable reserves at the end of 2008 were 9.6 million ounces, an increase of 20% from a year earlier.

Industrials were also a drag as Canadian National Railways gave back 61 cents to $40.20.

From the economic world, retail sales in December fell 5.4% in December to $33 billion - the largest monthly decline in over 15 years.

Statistics Canada says three-quarters of the December retail decline was rooted in the automotive sector, without which retail sales fell 1.8%.

Cheerful news came out Monday, however, reporting consumer confidence reversed ground in December and was making its way up to its highest levels since August.

The Harris-Decima survey of 2,000 people between Feb. 5 and Feb. 15 found 27% predicting they'll be better off a year from now, against 13% who expect to be worse off in early 2010.

This was an improvement from the previous tally in December, when only 20% expected to be better off and 18% had a pessimistic one-year outlook.

The proportion saying now is a good time for a major purchase rose to 41% this month from 35% in December.

The Canadian dollar was up slightly by lunch time to 79.94 cents U.S.

BAYSTREET Of the 13 TSX sub-groups, all but two were in negative country; gold stocks having slid 2.1%, while materials and industrials were down 1.8% each

Gainers were metals and mining, up 0.2%, health-care stocks ahead slightly less.

The TSX Venture Exchange dropped three points to 889.90 while the NASDAQ Canada index skidded 1.33 points, to 410.25

ON WALLSTREET

The Dow Jones industrials index had tailed off 82.43 points by the noon hour in New York to 7,283.24, after making gains earlier in the day.

Should it close where it stood at noon, it would be at an 11-year low.

The Standard & Poor's 500 index slumped 10.60 points to 759.45, while the NASDAQ composite index subsided 29.41 points to 1,411.82

On things economic, the U.S. Treasury Department, Federal Deposit Insurance Corp., Office of the Comptroller of the Currency, Office of Thrift Supervision and the Federal Reserve jointly issued a statement saying they will do all they can to shore up the struggling banking system.

The regulators also said they will launch a revamped program to inject fresh capital into financial institutions this week.

The Wall Street Journal reported that Citigroup is negotiating with government officials to have the U.S. boost its stake in the bank to as much as 40%.

The Journal, which said Citigroup made the proposal to its regulators, noted that sources say executives would prefer to keep the government's stake closer to 25%.

In New York, Citigroup shares were still up 15 cents to $2.10 U.S.

Ford Motor has reached a tentative deal with its union on changed to retiree health care benefits, considered to be a critical concession on the part of the UAW. Shares rallied 13%

Elsewhere on the economic front, a survey of 47 leading economists by The National Association of Business Economists finds that the recession will deepen before a turnaround begins later this year, projecting stronger-than-average gross domestic product growth in 2010.

The group, which officially determined that the nation entered recession in December 2007, said Monday that the economists see a 5% decline in GDP this quarter and a 1.7% drop in the second quarter. But a pickup will begin in the second half, and growth of 3.1% is seen next year, the economists predict.

Investors will also be watching a summit at the White House, where President Barack Obama is bringing together dozens of advisers and adversaries to discuss how to curb a burgeoning federal deficit laden with Social Security, Medicare and Medicaid obligations.

The summit is the first meeting toward a strategy to address America's long-term fiscal health and comes as Obama prepares ambitious plans to cut the federal deficit by half within four years.

Treasury prices fell, raising the yield on the benchmark 10-year note to 2.80% from 2.79% Friday. Treasury prices and yields move in opposite directions

The crude contract on the New York Mercantile Exchange was unchanged at $40.03 U.S. a barrel.

The April bullion contract on the New York Mercantile Exchange fell $13.40 to $988.80 U.S. after closing above $1,000 U.S. on Friday