MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING TUESDAY DECEMBER 23, 1997 (1)
Wednesday, December 24, 1997
Bay Street resumes slide
Bay Street fell for the ninth time in the past 11 sessions, led by interest rate sensitive issues. Wall Street lost ground as investors trimmed holdings in companies seen as vulnerable to earnings shortfalls
The Toronto Stock Exchange 300 composite index fell 42.48 points, or 0.6%, to 6553.05. More than 106.2 million shares changed hands, up from 85.1 million shares traded Monday.
Stocks have been hurt in recent weeks on concern that slowing Asian economies will reduce the profits of Canadian exporters. As non-Canadian investors sell Canadian dollar denominated securities for better returns elsewhere, the Bank of Canada may be forced to raise interest rates to maintain the attractiveness of the currency.
"The C$ is under pressure as the economy is seen as commodity-based," said Brendan Kyne, of AGF Management Ltd. He said that since foreign investors expect to see commodity sales slow because of Asian economic problems, they are selling shares of producers and converting the C$ proceeds to their home currencies.
The C$ fell to US69.57›, from US69.71› Monday. Its record low is US69.2›.
The currency's decline "raises the spectre of a further [increase] in interest rates, which made banks and utilities a little softer," said Norman Duncan, a broker with C.M. Oliver & Co.
Royal Bank of Canada (RY/TSE) fell $1.95 to $75.25, Canadian Imperial Bank of Commerce (CM/TSE) dropped $1.45 to $43 and BCE Inc. (BCE/TSE) slid 85› to $47.10.
Canadian telecommunication equipment maker Newbridge Networks Corp. slipped again on fears its Asian sales will slow. About 13.5% of the firm's sales came from the Asia Pacific region in 1997. Newbridge shares (NNC/TSE) tumbled $1.50 to $50.
Metal issues fell on news that South Korean manufacturers are finding it difficult to buy metals they need to keep rolling out goods, as international metals traders and producers grow reluctant to let the country's institutions buy on credit.
Copper producer Noranda Inc. (NOR/TSE) slipped 35› to $24.50 and nickel producer Inco Ltd. (N/TSE) fell 35› to $24.55.
Gold producers, which account for 5.4% of the benchmark TSE 300, gained after bullion rose as traders bet prices would not fall much lower amid high seasonal consumption. Placer Dome Inc. (PDG/TSE) rose 50› to $17.70, Barrick Gold Corp. (ABX/TSE) gained 90› to $26.85. Bullion for February delivery gained US$3.20 to US$294.30 an ounce on the New York Mercantile Exchange's Comex division.
Other major Canadian markets closed mixed. The Montreal Exchange portfolio fell 31.2 points, or 0.9%, to 3321.7. The Vancouver Stock Exchange index rose 0.77 of a point, or 0.1%, to 594.76.
HOT STOCKS
Quebecor Inc. (QBRb/TSE), down $2.55 to $25, on volume of 1.9 million shares. Quebecor Printing (IQI/TSE), up 75› to $24.75, on volume of 433,995 shares. Investors were less than happy with the company's decision to kill a restructuring plan designed to boost shareholder value. A key element of the nixed scheme was a plan to spin off stakes in Quebecor's publicly traded printing and forest products unit. Analyst Vince Valentini of Levesque Beaubien Geoffrion downgraded his rating on Quebecor Inc. to a "hold" from a "buy".
Meanwhile, the company went ahead with unveiling a new management team to replace that of ailing chief executive Pierre P‚ladeau, who slipped into a coma earlier this month after suffering a coronary thrombosis. P‚ladeau's successor is 20-year Quebecor veteran Jean Neveu. P‚ladeau's sons, Erik and Pierre-Karl, will also get new posts.
Potash Corp. shares (POT/TSE) gained $1.50 to close at $118.50 yesterday. Fertilizer giant Potash Corp. of Saskatchewan Inc. is expanding in Eastern Canada by acquiring all the shares of Potash Co. of Canada Ltd., which owns a dormant New Brunswick mine. But Potash Corp. is not saying how much it will pay Potacan's joint owners, Kali & Salz Beteiligungs AG of Germany and Entreprise MiniŠre et Chimique of France. As the deal is subject to due diligence, Potash Corp. spokeswoman Betty-Ann Heggie said terms are not being disclosed until a final agreement is signed in about three weeks.
Seagram Co. Ltd. (VO/TSE), up 20› to $44, on volume of 435,740 shares. Seagram owned Tropicana Beverage Group said yesterday it had acquired Copella Fruit Juices Ltd., Britain's biggest producer and marketer of chilled apple juice. The company has annual sales of US$16.7 million. Analysts say it is a good fit with Tropicana's orange juice business, the largest in terms of market share in Britain.
AIT Advanced Information Technologies Corp. (AIV/TSE) fell 16› to $1.44 on news the company expects a loss of $1.5 million to $1.8 million, on revenue of $3.7 million to $4 million, in the first quarter of fiscal 1998 (ending Dec. 31). That compares with a net loss of $476,000 on sales of $5.2 million a year earlier.
A delay in signing a major order forced AIT to issue a warning on its quarterly results yesterday. President and chief executive Peter Bennett said he does not expect to report a loss for the second quarter. Ottawa-based AIT makes and sells security technology, such as video surveillance and digital recording products.
Barrick Gold Corp. (ABX/TSE), up 90› to $26.85, on volume of 1.2 million shares. Placer Dome Inc. (PDG/TSE), up 50› to $17.70, on volume of 724,963 shares. The Toronto Stock Exchange precious metals & minerals subindex rose 128.65 points, or 2.09%, to 6276.44. Gold climbed US$3.20 to US$294.30 an ounce on the Comex division of the New York Mercantile Exchange.
After tumbling to 18-year lows earlier this month, gold is coming back to life. Analysts attribute the rebound to a number of factors, including an expected increase in demand from India. Other analysts say that prices had reached the technical target a lot of funds were looking for and that triggered the upward move.
Saputo Group Inc. (SAP/TSE) closed up $0.25 to $23.25. Saputo, one of North America's biggest cheese makers and distributors, plans to buy out Froma-Dar Inc., a Quebec cheddar and dairy products firm, for an undisclosed price. Saputo had owned one-third of Froma-Dar shares and now will consolidate on a 100% basis. Froma-Dar had annual sales of about $28 million and operating income of about $750,000. - Robert Gibbens/For FP
St. Genevieve Resources Ltd. (SGVE/CDN), down 13› to 3›, on volume of 2.5 million shares. KWG Resources Inc. (KWGR/CDN), down 35› to 5›, on volume of 4.6 million shares. The two junior gold miners began trading yesterday on the over-the-counter market after being suspended from the TSE and the Montreal Exchange. St. Genevieve and KWG went under court protection from creditors shortly after $20.9 million went missing from three affiliated companies in November. The companies must file a restructuring plan with the Quebec Superior court by Jan. 23. Both stocks are trading "without quotation" because neither has yet applied to the Canadian Dealing Network to have its daily share price publicly quoted each day.
NEW YORK COMMENTARY
Given that U.S. markets mainly shook off the big tumble in South Korea's markets on Wednesday, it's unlikely that a rebound there will do much to help Wall Street. The World Bank's pledge to loan $3 billion to Korea will probably aid trading in that nation, which suffered a 7.5% decline on Tuesday, but little residual impact is expected here.
In what should be a sleepy session, given the 1 p.m. close, there does not seem to be much reason to expect U.S. stocks to climb higher on Wednesday. Many traders will be absent, looking to get a jump-start on the Christmas holiday. Those who remain aren't expected to show much enthusiasm for buying. The expectation is that few traders will want to be "long" the market heading into what is a four (or five) day weekend for many players.
"I'm afraid not very many people are going to come in tomorrow and say, 'I'm going to buy stocks,' " said Doug Myers, vice president for stock trading at Interstate Johnson Lane.
Although big drops in Korea's stock and currency on markets Tuesday were not cited as major factors in the Dow's 128-point tumble and the Nasdaq's 22-point retreat, Myers said the worries about Asia have cast a pall over Wall Street. And those concerns about the extent of the slowdown -- and how it will affect U.S. corporate earnings -- are preventing stocks from enjoying the strength usually evident at this time of year, he said. Other players concur.
"You would expect this to be a seasonally strong period, but there's so much nervousness and concern about what the (Asian) currency crises mean and that they themselves don't have a good handle on the problem," said Barry Berman, co-manager of trading at Robert W. Bair. "The timing is poor."
Though bond trading is scheduled to close early as well, fixed-income traders will have jobless claims and consumer-sentiment figures to deal with. As with stocks, there's little expected from the bond market Wednesday.
After The Bell
Arterial Vascular (AVEI) shares were rising in after-hours trading after the company said it received regulatory approval to market two coronary stents. The stock rose 2 1/8 to 64 3/4 during the New York session.
Ambassador Apartments (AAH) and Apartment Investment and Management (AIV) agreed to merge in a deal worth $682 million.
USX Corp. said it will redeem all the outstanding shares of USX-Delhi Group (DGP) for 20 3/5 per share.
Software-tools developer Summit Design (SMMT) said it will buy back up to 750,000 shares.
Chromatics Color Sciences (CCSI) set a 3-for-2 stock split that is subject to shareholder approval.
Roadway Express (ROAD) said its fourth-quarter earnings will be up slightly from the 52 cents it earned a year ago. Wall Street was expecting the freight carrier to earn 79 cents in the quarter.
Information Storage Devices (ISDI) said it expects to lose about 60 cents per share in its fourth quarter, well in excess of the penny per share loss analysts were expecting from the designer of audio chip technology.
Tuesday's Markets
It had all the looks of a typical holiday-week day: slow, quiet, sloppy -- until the very end, that is. After drifting quietly lower through much of the day Tuesday, stocks tumbled in the last hour of trading, sending the Dow down 128 points while the Nasdaq declined more than 22. Responsibility for the decline was placed on a big fall in the March S&P futures contract, which tumbled through 50-day and 100-day moving averages, but the extent of the move caught many market players (and pundits) off-guard.
The good tidings that presided over technology in Monday's session were notably absent on Tuesday. Semiconductor and equipment makers were particularly hit hard by news of further declines in Korea's markets. Korea is home to some of the world's largest chip makers, and economic woes there mean a tougher pricing environment for chip makers and diminished orders for equipment firms. Or so the consensus thinking goes.
The Dow Jones Industrial Average ($INDUA) tumbled early on and failed to spend any meaningful time in positive territory. The blue-chip index slid more than 55 points early on, then struggled to climb back to break-even at about 11:15 a.m. EST. The index chopped its way through the afternoon session entirely in negative territory in a range of between single digits and down 40 points. In the last half-hour, however, the Dow tumbled dramatically, finishing the session off 127.55 points at 7,691.77.
Although semiconductors were backpedaling, the Nasdaq Composite Index (COMP) demonstrated some strength early on. The tech proxy fought off an initial rise to climb into modestly positive territory in conjunction with the Dow. The index then slid lower through the rest of the morning and throughout the afternoon, closing at its lows -- off 22.15 points at 1,509.91. The Philadelphia Semiconductor Index (SOX) shed 10.96 to 258.81, while the Morgan Stanley High Tech Index (MSH) closed off 8.51 points to 425.57.
The S&P 500 (SPX) slid 14.59 points to 939.11, while the Russell 2000 Index (RUT) gave up some early gains to close off 0.85 points at 422.03.
On the NYSE, 528 million shares were traded and declining stocks beat out advancers by a 15-to-13 margin. In Nasdaq activity, 622 million shares were exchanged, while advancing issues were whipped by decliners by a 24-to-19 spread.
Though Japan's markets were closed Tuesday, there were worries aplenty coming out of Asia: South Korea's Composite Index suffered its worst percentage decline in history, falling 7.5% as the won tumbled again versus the dollar. Sparking the sell-off was a downgrade from Standard & Poor's Corp. of the nation's debt rating to "junk" status, and some frightening comments from newly elected President Kim Dae-jung.
"We don't know whether we would go bankrupt tomorrow or the day after tomorrow," Kim told local media Monday. "I can't sleep since I was briefed (about the financial situation). I am totally flabbergasted."
Early on, the bond market responded positively to the unrest in Korea and the Commerce Department's final revision of third quarter GDP to 3.1% from 3.3%. A stronger than expected 4.8% increase in durable goods orders for November was an offsetting factor to those market-friendly events in a slow, technically driven session. Bond prices fell a quarter-point, sending the yield in the benchmark 30-year bond up to 5.90%.
|
