MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING TUESDAY, FEBRUARY 24, 1998 (1)
Wednesday, February 25, 1998
Drug makers led a decline in U.S. stocks on news of the failed merger between Glaxo Wellcome and SmithKline Beecham. Canadian stocks slipped as mixed bank results failed to offset weak commodity prices
The Dow Jones industrial average fell 40.1 points, or 0.5%, to 8370.1.
ÿ
More than 595 million shares changed hands on the New York Stock Exchange, up from 555.4 million shares traded Monday.
ÿ
The Standard & Poor's 500 composite index, which set a record Monday, fell back 7.58 points, or 0.7%, to 1030.56.
ÿ
The Nasdaq composite index lost 13.05 points, or 0.7%, to 1738.71, after climbing to a record in the previous session.
ÿ
The decline in U.S. stocks was led by drug makers after Glaxo Wellcome PLC and SmithKline Beecham PLC abandoned merger plans to create the world's largest drug company.
ÿ
Drug maker Merck & Co. (MRK/NYSE) lost US$2 11/16 to US$127 15/16, Schering-Plough Corp. (SGP/NYSE) slipped US$11 1/82 to US$747 1/88, Glaxo Wellcome American Depositary Receipts (GLX/NYSE) fell US$6 15/16 to US$551 1/82 and SmithKline Beecham ADRs (SBH/NYSE) sank US$6 to US$60.
ÿ
U.S. Federal Reserve chairman Alan Greenspan suggested in testimony to Congress that bad bank loans could mount in coming months. Still, his comments generally were positive for stocks, analysts said.
ÿ
J.P. Morgan (JPM/NYSE) rose US$3 11/16 to US$116 after it announced plans to fire about 700 employees to rein in costs that have been growing faster than revenue.
ÿ
Wal-Mart Stores Inc. (WMT/NYSE) rose 11/16 to US$467 1/88 after the retailer posted fourth-quarter earnings of US57› a diluted share.
ÿ
Motorola Inc. (MOT/NYSE) fell US$2 11/16 to US575 1/88 after it lost a US$500 million contract to Lucent Technologies Inc.
ÿ
Canadian stocks were mixed after first-quarter earnings from a pair of the country's largest banks failed to offset losses for commodity producers.
ÿ
The Toronto Stock Exchange 300 composite index rose 6.06 points to 6948.25 after falling as much as 29.6 points soon after Greenspan's comments.
ÿ
More than 117.3 million shares changed hands on the TSE, up from 100.2 million shares traded Monday.
ÿ
Barrick Gold Corp. (ABX/TSE) fell 50› to $25.20 and Teck Corp. Class B shares (TEKb/TSE) lost 80› to $18.80 after Iraq's agreement to allow new weapons inspections reduced the likelihood of a U.S. attack and the need to hold precious metals as a haven from instability.
ÿ
Bullion for April delivery fell US$2.40 to US$291.70 an ounce on the Comex division of the New York Mercantile Exchange.
ÿ
Bank earnings failed to inspire confidence that Canadian companies are poised to reveal accelerating profit growth in coming days.
ÿ
Bank of Nova Scotia (BNS/TSE) failed to beat analysts' earnings estimates and its stock fell 10› to $34.65.
ÿ
The bank reported fiscal first-quarter earnings of 63› a share, up from 57› a share year-ago. The result matched the expectations of five analysts polled by IBES, which tracks earnings estimates.
ÿ
Bank of Montreal (BMO/TSE) fared better, rising $1.30 to $76.30 after it reported better than expected earnings of $1.29 a share for the fiscal first-quarter, up from $1.17 a year-ago.
ÿ
Among other banks, Toronto-Dominion Bank (TD/TSE) rose 55› to $62.50 and National Bank of Canada (NA/TSE) was unchanged at $24.05. Both will report tomorrow.
ÿ
Royal Bank of Canada (RY/TSE) gained 90› to $82.85 and Canadian Imperial Bank of Commerce (CM/TSE) fell 5› to $44.90. Both banks report on March 5.
ÿ
Other active stocks included Northern Telecom (NTL/TSE), which slipped 90› to $70.10, BCE Inc. (BCE/TSE), which fell 25› to $49.40 and Alcan Aluminum Ltd. (AL/TSE) slid 50› to $42.60.
ÿ
Other Canadian markets were mixed.
ÿ
The Montreal Exchange portfolio rose 11.94 points, or 0.3%, to 3,589.67.
ÿ
The Vancouver Stock Exchange fell 4.09 points, or 0.7%, to 613.
For a scorecard of trading activity on all Canadian Stock Exchanges, go to:
quote.yahoo.com .
REFERENCE: Canadian Market Summary
canoe2.canoe.ca
Major international markets ended mostly lower.
ÿ
London: The FT-SE 100 index fell 51.8 points, or 0.9%, to 5,651.
ÿ
Frankfurt: Germany's blue-chip Dax index ended weaker. It fell 58 points, or 1.3%, to 4,599.54.
ÿ
Tokyo: Japanese stocks hit there lowest level in a month, amid doubts that Japan will adopt any economic stimulus steps soon. The 225-share Nikkei average closed down 411.49 points, or 2.5%, at 16,198.
ÿ
Hong Kong: Stocks were largely unchanged after a late spurt of bargain-hunting. The Hang Seng Index lost 1.87 points to 10,683.34.
ÿ
Sydney: Australian stocks ignored overseas weakness to end with solid gains. The all ordinaries index rose 11.1 points, or 0.4%, to 2,666.2.
*************************************************************************************
MARTIN'S BALANCED BUDGET DOLES OUT SMALL RELIEF FOR ALL - By ALAN TOULIN - Ottawa Bureau Chief The Financial Post
Ottawa cuts taxes, introduces new spending and says it can whittle down accumulated national debt. Paul Martin relishes his moment of glory Reaction: A muted hallelujah chorus .
In an historic moment, Finance Minister Paul Martin stood in the House of Commons yesterday to deliver what finance ministers have dreamed about for the past 30 years -- a balanced budget that allowed for tax cuts, new spending and steady reduction in the national debt.
ÿ
"It is clear that a new era lies ahead," Martin told Parliament, saying Canada's economic prospects are better than they have been in 25 years. Martin predicts 3% economic growth for this year and 2.5 % next.
ÿ
Not only will there be a surplus in the budgetary year ending March 31, but Martin promised balanced budgets for the next two years, something unseen in nearly 50 years of Canadian fiscal policy.
"It's a very balanced budget; anyone who is crusading for either higher spending, lower taxes or lower debt won't be pleased because Martin is giving a little bit to each," said John McCallum, chief economist at Royal Bank of Canada.
ÿ
Economists think the future could be more difficult for Ottawa as the annual surpluses become larger and pressures mount on what to do with the largesse. As of Dec. 31, which takes in the first nine months of the fiscal year, Ottawa has a $5-billion surplus.
ÿ
"I think they have successfully for another year been able to hide how well they are doing," said Tim O'Neill, chief economist with the Bank of Montreal. ÿ"I don't think there is any question we will see a much better than projected fiscal performance next year."
ÿ
Martin said yesterday the tax cuts were "targeted" to the working and middle classes to begin with, but promised to widen them out to take in Canada's higher-income earners "as soon as the country's resources permit."
ÿ
With the prospect of multibillion-dollar surpluses after cleaning up the government's books, Martin said Ottawa can now focus on high priorities such as education, skills training, health care and greater social and economic security for individuals.
ÿ
"Canada is not just a marketplace -- it is a community," Martin said in staking out Ottawa's new priorities.
ÿ
A buoyant economy, low interest rates and increased revenue converged to help Martin balance the books this year, a goal he earlier said might not be possible until the end of the 1998-99 fiscal year. ÿThe federal government, under pressure from all sides on how to use the surplus, tilted in favor of new spending and small tax cuts -- at least for now.
ÿ
But Martin pledged to use the $3-billion set aside every year, starting in 1998-99, as a contingency fund to handle unexpected events or to pay down the $583-billion natonal debt.
ÿ
This debt repayment plan, and continued growth in the economy, will shrink the overall burden of the cumulative debt, Martin said. The debt burden, as measured as a ratio of the overall economy, will be 68% this fiscal year and will drop to 65% in 1998-99 and 62% in 1999-2000. ÿOttawa had promised that 50% of any surpluses would go to new spending or restoring spending that had been axed in the deficit fight. The other 50% was earmarked for tax relief and debt reduction.
ÿ
Yesterday's budget measures, over a four-year period, represent $10.9 billion on new spending and $7 billion for tax relief. ÿIn the meantime, the major beneficiaries of the initial surpluses will be students and low- and middle-income Canadians. ÿAs expected, the centrepiece for aid to students is a $2.5-billion endowment fund -- Canada Millennium Scholarships -- geared to helping individuals get access to post-secondary education. The fund will help 100,000 full- and part-time students each year with scholarships that average $3,000 annually.
ÿ
At the same time, Ottawa moved to ease rules on RRSPs and RESPs to provide more financing for people to improve their education and skills. The budget also contains debt relief measures for students to defray their financial burden, including interest rate relief.
ÿ
Taxes for low-income Canadians will be reduced in the first federal tax cut in six years. The 3% general surtax, first introduced in 1986 as a temporary, deficit-fighting measure, will be eliminated effective July 1 for those earning up to $50,000. For those earning between $50,000 and $65,000, the tax will gradually be eliminated by 1999. ÿThe tax cut will mean an extra $250 each for 4.3 million tax filers when fully in place. The income-tax cuts are the first since the Progressive Conservatives took the surtax down to 3% in 1992 from 5%.
ÿ
Taxes will be cut for another 4.6 million low-income Canadians, with Ottawa raising the basic amount of tax-free income by $500 for individuals and $1,000 for families. The measure will reduce taxes by $85 annually for individuals and $170 for families.
ÿ
Among social spending measures, Ottawa increased the child tax benefit for poor families, made more funds available to help with child care and set aside $350 million to implement the social goals of the Royal Commission on Aboriginal Peoples, which reported last year.
ÿ
There were few measures for corporate Canada or small business in the budget. Ottawa is waiting for a task force report expected in April on reforming the corporate tax system.
****************************************************************************************
**************************************************************************************** |
