|
By Oliver Bertin
The Globe And Mail
Report on Business
Saturday, January 24, 2004
U.S. blue-chips fell in volatile trading Friday while Canadian stocks closed higher, as investors continued to try to read the latest economic and corporate developments for signs of whether the bull market is running out of steam.
Adrian Mastracci, investment counsel at
Vancouver based ‘fee-only’ KCM Wealth Management, says, “Never expect a straight-line up. The markets have come a long way. A pullback isn't surprising.”
Technology stocks went straight up and then down, while the blue-chips suffered through the afternoon, sending the Dow Jones industrial average down 120 points before a late-afternoon rally pulled the index up.
Through it all, the Canadian dollar went off course, falling 1.04 cents (U.S.) to 76.16 cents in a delayed reaction to Thursday's Bank of Canada economic forecast. The loonie fell a day after the central bank lowered its growth estimate for the Canadian economy by half-a-percentage point to 2.75 per cent and hinted it may lower interest rates once again.
The Dow Jones industrial average finally closed at 10,568.29, down 54.89 points or 0.5 per cent on the day, while the Nasdaq Stock Market composite index reversed a two-day selloff, rising to 2,123.87, up 4.86 points. The broadly based S&P 500 fell 2.39 points to 1,141.55.
The S&P/TSX composite index survived the day, rising 15.62 points to 8,604.73, as a 1.8 per cent rise in the technology sub-index balanced a 0.2 per cent drop in industrials. The TSX Venture Exchange composite index fell 0.94 points to 1,814.47.
Over the past week, the TSX has risen 0.9 per cent. The Dow has fallen 0.3 per cent, while Nasdaq dropped 0.78 per cent and the S&P 500 rose 0.15 per cent.
The euro fell to $1.2567 (U.S.), from $1.2696 on Thursday. New York gold closed at $407.90, off $2.10.
Peek behind the numbers, however, and most analysts saw a market that was pulling back after a long steady rise.
"Never expect a straight-line up," said Adrian Mastracci, an investment counsellor with KCM Wealth Management Inc. in Vancouver. "The markets have come a long way. A pullback isn't surprising."
Many stocks are now trading for 40, 50 or 60 times earnings, he said, and investors are questioning the sky-high prices or taking profits at two-year highs and rolling the proceeds into slow, but steady blue-chips.
Gavin Graham, vice-president of the Guardian Group of Funds in Toronto, advised investors to look carefully at the industrial sectors. Retail, housing, financial and many techs are fully valued, while health-care, consumer staples and energy look reasonably good, especially with crude oil at $35 a barrel.
"It's the first week in nine that the major indices have come down," he said.
Interest rates never seem to be far from economists' minds, and Friday was no exception. Derek Holt, assistant chief economist with Royal Bank of Canada, said he has changed his mind given recent news events and now expects the Bank of Canada to cut rates by another quarter percentage point at its meeting on March 2. After that, he said, business and consumer borrowing costs should be on hold for the rest of the year. He pointed to recent short term indicators, including disappointing numbers on trade, manufacturing shipments and vehicle sales.
However, he said RBC remains more optimistic than the Bank of Canada on the GDP. RBC expects Canada to grow by 3.25 per cent this year, a half-percentage point above the central bank's estimate on Thursday. As for the United States, he expects growth of 5 per cent in 2004 and 3.5 per cent in 2005.
In business news, Microsoft Corp. charged upwards after the tech bellwether posted record second-quarter sales and a strong operating profit, confirming that people are buying software again. But the report included two negatives, a one-time charge for stock-based compensation and signs that business customers are shying away from annual upgrades. The Nasdaq stock rose by 1.7 per cent on a volume of 126 million shares.
AT&T Wireless Services Inc. rose 0.5 per cent on the NYSE a day after a subsidiary announced it may sell its one-third, $1.6-billion stake in Rogers Wireless Communications Inc.
In Canada, the head of technology at Ballard Power Systems Inc. left "by mutual agreement" after the markets closed Thursday, sending shares of the Vancouver fuel-cell company down by 1.5 per cent Friday. The fuel cell developer announced its chief technology officer is leaving "to pursue other professional interests."
CAE Inc. fell by 4.8 per cent Friday after analyst Peter Rosenberg of UBS Securities Canada Inc. said the commercial outlook remains weak, military backlogs are short and profit margins are low. Furthermore, president and chief executive officer Derek Burney retires later this year when he turns 65.
Toronto-area ice-cream maker CoolBrands International Inc. headed up another 5.7 per cent Friday to $22, one day after it said sales more than doubled and earnings tripled in the first quarter. The stock rose 14 per cent on Thursday to a 52-week high.
Perennial market favourites Nortel Networks Corp. and Lucent Technologies Inc. both moved in heavy trading. Nortel rose by 4.2 per cent to $8.52 in Toronto a day after saying it planned to pull out of manufacturing, while Lucent rose 1.5 per cent on the NYSE on a volume of 127 million shares.
|
