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By Patrick White
Reuters
Sunday, December 14, 2003
MONTREAL, Dec 14, 2003 (Reuters) - Hopes are high that the Toronto Stock Exchange's key index will end the year above the magic 8,000 mark, a 30-month high, but analysts warn that more upbeat economic news from the United States, Canada's dominant trading partner, is needed for it to perch on that plateau.
Adrian Mastracci, investment counsel and president of Vancouver based ‘fee-only’ KCM Wealth Management, says, “We are very close to 8,000, only some 30 points away. It is probably going to happen in the next little while, as New York has already reached the 10,000 level.”
The S&P/TSX composite index (.GSPTSE) briefly broke through 8,000 last week but then fell back. It closed the week at 9,979.20, down 11 points from the week before.
"We still have a little bit of unknown in the U.S.," said Adrian Mastracci, investment counsel and president at KCM Wealth Management Inc. "Businesses are not spending a lot yet. There is encouraging news, but it is still hard to tell that (the economic recovery) is there for sure."
This week, U.S. retail sales came in pretty strong, but U.S. jobless claims actually increased, and threw some cold water on the market.
"We are very close to 8,000, only some 30 points away. It is probably going to happen in the next little while, as New York has already reached the 10,000 level. This gives us more impetus to (break the 8,000 level) this year," Mastracci said.
Reuben Brant, vice-president of Brant Securities in Toronto, expects Toronto stocks to end the year higher.
"It still looks like Toronto will be higher before the year end and in January. As long as interest rates stay low, the market will be OK. Just make sure you don't run out of money," he said.
Peter Arender, portfolio manager at brokerage firm Acker Finley, said the market is "doing OK" now as there is growing evidence that interest rates will stay low for a while in Canada.
The Bank of Canada's key overnight rate is 2.75 percent, compared with the equivalent U.S. fed funds rate of 1 percent.
Arender is "cautiously bullish" but he urges investors to be selective about the stocks they buy.
"You can do a lot better than buying the index. There is good value in the consumer discretionary, energy, consumer staple and health-care sectors," he said.
Analysts warn, however, that a wave of year-end profit-taking could hit the market in the next two weeks after the S&P/TSX composite index's 20 percent gain so far this year.
Mastracci said the sectors to watch out for in the next few weeks in Toronto are the gold-mining and oil and gas stocks because of rising commodities prices.
"There are going to be ups and downs that will make oil stocks a good play," he said.
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