Rally stifled

Mar. 5, 2009 (Baystreet.ca) --

12:32 pm EST Stocks fell hard Thursday after a litany of grim developments: GM said its survival is in doubt, bank shares took a beating and Citigroup broke the buck.

Adding to the global woes: China defied expectations by failing to boost its economic stimulus program.

Toronto's S&P/TSX composite index was still down 132 points at noon time, to 7,682.76.

There had been hopes that China would use the start of the National People's Congress' annual session to announce new economic measures, in addition to the promised spending of $585 billion U.S. outlined in November.

But there was a sense of letdown after Chinese Premier Wen Jiabao said Thursday the government would help the world's third-largest economy grow by 8% this year, but stopped short of promising new measures.

The financial sector was down after undergoing a battering earlier in the week in the wake of a $62-billion U.S. loss at insurer American International Group, a U.S. corporate record.

Royal Bank declined 85 cents to $29.73 and CIBC shares were down $1.75 to $37.88 after it announced that it will raise up to $1.6 billion in a Tier 1 debt issue. It said that completion would take the bank's pro-forma Tier 1 capital ratio to about 11.5%.

Canadian Western Bank reported Thursday a first-quarter profit of $25.6 million, down 1% from a year-earlier $25.9 million, as the fallout of the economic downturn continued to pressure its earnings. Its shares gave back 32 cents to $10.28.

The TSX energy sector lost amid falling oil prices and earnings reports from some of the oilpatch's heavyweights - while another company filed for creditor protection.

Natural gas explorer and producer Canadian Superior Energy Inc. says it has filed an application with the Court of Queen's Bench of Alberta for protection from creditors under the federal Companies' Creditors Arrangement Act. Its shares plunged 23 cents to 26 cents.

Canadian Natural Resources Ltd. shares rose $1.44 to $39.98 after it said Thursday it was reducing its 2009 capital spending budget by $800 million in anticipation of a turbulent year marked by low commodity prices. The Calgary-based oil and gas company recorded net earnings of $1.8 billion during the fourth quarter, up from year-earlier profits of $798 million.

Canadian Natural also said it was raising its annual dividend by 5% to 42 cents per share.

Shares in Talisman Energy Inc. drifted seven cents lower to $11.41 after it said Thursday that net earnings for the latest quarter came in at $1.2 billion, up sharply from year-earlier profits of $656 million.

Talisman said it benefited from the high oil prices that prevailed throughout much of the year, reporting a 69% surge in 2008 profits to $3.5 billion from year-earlier net earnings of $2 billion.

Peyto Energy Trust units moved up eight cents to $6.93 as quarterly profits were $50.7 million, a 31% decrease from a year earlier.

The base metals sector was off as Teck Cominco Ltd. stepped back 29 cents to $3.46.

Mongolia has submitted a draft agreement to allow Canadian mining company Ivanhoe Mines and Rio Tinto to mine at one of the country's largest gold and copper deposits.

Ivanhoe has been trying since 2001 to develop the potentially huge Oyu Tolgoi mine, but it has been held up by disagreements over how to share the wealth in a country suffering from widespread poverty and corruption.

It is not known how long it will take for final approval and Ivanhoe shares inched up three cents to $5.78.

The Canadian dollar backtracked 0.78 cents, to 77.67 cents U.S.

BAYSTREET Of the 13 TSX sub-groups, 11 were in negative country. Financials trailed yesterday by 2.9%, health-care stocks by 2.7% and industrials by 2%.

The two that gained were gold, ahead 2.6% and materials, up 1.9%

The TSX Venture Exchange was 3.10 points lower to 827.85, while the Nasdaq Canada index slipped 14.50 points to 393.86

ON WALLSTREET

The Dow Jones Industrials index gave back 225.98 by midday Thursday, to 6,650.12

The Standard & Poor's 500 index fell 26.90 points to 685.97 while the NASDAQ composite index listed downward 43.10 points to 1310.64

Among the big losers, financials were hit especially hard, particularly, Bank of America, Citigroup, Wells Fargo and Morgan Stanley.

Citigroup fell below $1 U.S. a share to its lowest level ever.

General Motors' annual report said its auditors have raised "substantial doubt" about the troubled automaker's ability to continue operations, and the company said it may have to seek bankruptcy protection if it can't execute a huge restructuring plan.

The company has sustained huge losses over the course of the recession and has already received $13.4 billion U.S. in federal loans.

GM has said it needs additional federal money to stay afloat. GM shares fell 14%. Competitor Ford Motor fell 17%.

Wal-Mart reported a bigger-than-expected jump in February sales, thanks in part to lower gas prices. Wal-Mart said that that sales at stores open a year or more, a retail metric known as same-store sales, rose 5.1% in February versus forecasts for a rise of 2.4%.

Separately, the company said it is boosting its annual dividend by 15% to $1.09 from $0.95 cents per share. Wal-Mart shares rose 4%.

Wal-Mart rival Target said sales fell 4.1%, sending shares 2% lower.

On the economic front, January factory orders fell 1.9% after falling 4.9% in the previous month. Economists surveyed by Briefing.com thought orders would fall 3.5%.

The number of Americans filing new claims for unemployment fell to 639,000 last week from 670,000 in the previous week, versus economists' forecasts for a drop to 650,000.

Another report showed that fourth-quarter business productivity was weaker than initially reported, falling at a revised 0.4% annual rate versus the initially reported 3.2% annual rate. Economists thought it would grow at a 1.1% annual rate.

Treasury prices rallied, lowering the yield on the benchmark 10-year note to 2.88% from 2.98% Wednesday. Treasury prices and yields move in opposite directions.

U.S. light crude oil for April delivery rose $1.43 to $43.95 U.S. a barrel on the New York Mercantile Exchange.

COMEX gold for April delivery rose $6.50 to $913.20 U.S. an ounce.