MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING FRIDAY, FEBRUARY 27, 1998 (1)
Saturday, February 28, 1998
Blue chip issues kept climbing on Wall Street, taking the Dow average and the Standard & Poor's index to record highs. Gains on Bay Street were tempered by declines in the banking sector
The New York Stock Exchange managed to avoid the crush of profit-taking, allowing the Dow Jones industrial average to close 55.05 points, or 0.7%, higher at 8545.72. On the week, it gained 131.78 points or 1.6%.
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The Standard & Poor's 500 composite index edged up 0.67 of a point to a new high of 1049.34, a gain of 15.13 points, or 1.5%, on the week.
The Nasdaq composite index fell 6.6 points, or 0.4%, at 1770.51. On the week it rose 42.38 points or 2.5%.
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"Everything is not participating," said Alfred Kugel, Stein Roe & Farnham senior investment strategist. "It isn't a big, powerful run."
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About 580 million shares changed hands on the NYSE, compared with 651 million on Thursday.
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Continued investor interest in the large multinational names buoyed the Dow, while technology stocks were among the leading groups hit by profit-taking.
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Among them was integrated circuit maker VLSI Technology Inc. (VLSI/Nasdaq), which sank US$57 1/816 to US$195 1/816 after the company said first-quarter revenue would be below forecasts. Other chip makers dropped, too. Intel Corp. (INTC/Nasdaq) lost US$2 5/8 to US$8911 1/816 and Texas Instruments Inc. (TXN/NYSE) fell US$3 5/8 to US$57 7/8.
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J.P. Morgan & Co. (JPM/NYSE) rose for the fifth time in six days, gaining US$2 1/2 to US$119 1/2 to lead the Dow industrials higher. The bank said this week it will cut staff to rein in expenses, which have outstripped revenue growth.
The Toronto Stock Exchange 300 composite index closed 4.82 points higher at 7092.49, its sixth consecutive gain.
Earlier, the TSE 300 climbed above the 7100 level for the first time since Oct. 24. It was up 171.75 points, or 2.5%, on the week.
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About 129 million shares were traded on the TSE, compared with 147.6 million on Thursday.
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"Investors are finding value in stocks that have sunk to extreme lows," said Ross Healy, president of Strategic Analysis Corp. "The gold index is cheap historically and oil stocks sold off on the price of crude."
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Barrick Gold Corp. (ABX/TSE) climbed 85› to $27.30 and Placer Dome Inc. (PDG/TSE) rose 55› to $18.05, sending the gold subgroup higher after gold on the Comex division of the New York Mercantile Exchange jumped US$4.70 to US$299.10 an ounce.
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Oil issues also buoyed the market on expectations of higher crude prices. Canadian Natural Resources Ltd. (CNQ/TSE) jumped 70› to $28.50 and Suncor Energy Inc. (SU/TSE) rose 50› to $52.25.
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Renaissance Energy Ltd. (RES/TSE) contributed to gains, rising $1.65 to $29 after unexpectedly low exploration costs and rising production offset lower than expected fourth-quarter earnings of 28› a share. Renaissance reported earnings of 47› a share a year earlier.
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Banks, however, tempered market gains. Reports indicating robust U.S. growth raised concern that inflation for Canada's largest trading partner may quicken, prompting higher interest rates.
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U.S. reports are closely monitored in Canada as the two countries are each other's largest trading partners.
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Bank of Nova Scotia (BNS/TSE) fell 75› to $35.10, Bank of Montreal (BMO/TSE) fell $1.30 to $76 and Toronto-Dominion Bank (TD/TSE) slipped $1.10 to $60.20.
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Other major Canadian markets closed mixed.
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The Montreal Exchange portfolio touched a record high of 3673.97, before retreating. It fell 14.26 points, or 0.4%, to 3643.31, but on the week it gained 76.27 points or 2.1%.
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The Vancouver Stock Exchange index rose 12.84 points, or 2.1%, to 629.47, but was flat on the week, down 0.24 of a point.
For a scorecard of trading activity on all Canadian Stock Exchanges, go to:
quote.yahoo.com .
REFERENCE: Canadian Market Summary
canoe2.canoe.ca
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Major overseas markets gained.
London: Britain's leading share index eased back from an early high to end at its second successive closing record, in an atmosphere of feverish bid speculation. The FT-SE 100 index closed at 5767.3, up 2.5 points, for a gain of 15.7 points, or 0.3%, on the week.
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Frankfurt: Germany's blue-chip index finished trade almost level after posting an earlier record high. The Dax index closed at 4709.83, up 17.8 points or 0.4%, for a rise of 107.18 points ,or 2.3%, from last Friday.
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Tokyo: Japanese stocks closed higher on growing expectations that the government will take bolder economic stimulus steps. The 225-share Nikkei average closed at 16,831.67, up 329.97 points or 2%.
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Hong Kong: Stocks rallied after a rocky start to close sharply higher. The Hang Seng index closed at 11,480.69, up 255.91 points or 2.3%. It soared 880.9 points, or 8.3%, on the week.
Sydney: Australian shares wandered to a flat finish. The all ordinaries index closed at 2697.4, up 1.4 points on the day and 2% on the week.
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SEC chief fears insider trades rise among analysts
WASHINGTON (Reuters) - Insider trading may be increasing among Wall Street analysts and other professionals privy to confidential corporate information, the nation's top securities regulator said Friday.
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Arthur Levitt, chairman of the Securities and Exchange Commission, told a group of lawyers here that his agency has seen a rise in unusual trading patterns shortly before companies release sensitive information to the public.
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"The SEC is watching this situation very closely, and we hope that self-restraint will solve the problem -- before we have to step in," Levitt said in remarks prepared for the Washington conference.
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Levitt asserted it was wrong for analysts and others who are not technically corporate insiders to trade on the corporate leaks they receive ahead of the public.
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"Legally, you can split hairs all you want. But, ethically, it's very clear. If analysts or their firms are trading -- knowing this information, and prior to public release -- it's just as wrong as if corporate insiders did it," Levitt said.
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The Supreme Court last June upheld an important section of the nation's securities law that makes it a crime for a person to use confidential information in securities trading, even if that individual is not technically an insider. Top corporate officers and directors are typically
considered insiders.
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Companies often tell Wall Street analysts and certain institutional investors sensitive news before that information is made public.
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"In the interval -- after the analysts know the news, but before the public knows it -- there is a great deal of unusual trading," Levitt said.
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Securities firms are supposed to have information barriers to stop the spread of sensitive data, he said.
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"When we see trading spikes in this short time period, I worry about the effectiveness of those internal mechanisms," he said.
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During the period in which only some analysts have been told material information and the news has not been publicly disseminated, "no one who knows that information should be trading," Levitt said.
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Ultimately, he said, companies should not share confidential information with analysts.
"My preference is that calls to analysts should not come before a press release, and that -- even then -- these discussions should not divulge new material information not contained in that press release," he said.
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Buyout fears fuel poison pill fever - By DAVID STEINHART - The Financial Post
But pressure building to change corporations laws, lengthening time to
consider takeover bids.
The poison pill is alive and well in Canada, driven by what companies say is a need to buy themselves more time to plot strategy when confronted with an unsolicited takeover bid.
The new wave of shareholder rights plans comes as a Senate committee is pondering a report on legislation that would, among other things, increase the minimum time a takeover stays open from 21 to 45 days.
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This week, Canadian Airlines Corp., Rigel Energy Corp., Royal Oak Mines Inc. and Mosaid Technologies Inc. introduced poison pills. The plans give Canadian and Royal Oak 60 days, and Rigel 45 days to consider an offer. Mosaid didn't specify how long it would require a bid to stay open.
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While company officials insist no takeovers are in the offing, they say shareholders will be better off with the pill until amended legislation can be introduced.
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Donald Gardner, vice-president and chief financial officer of Calgary-based Rigel, said federal legislation is not providing enough time for the board or shareholders to consider a takeover bid properly.
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Lee Gill, Industry Canada's acting director of the corporate law/policy division, said Friday a new bill, if drafted, could be introduced as early as this fall to grant companies the extra time they now seek through the poison pills.
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And once amendments to the Canada Business Corporations Act are adopted and clearly defined, provincial governments would likely go ahead with similar amendments to their own securities acts, analysts said.
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Jeff Angel, director of corporate communications for Calgary-based Canadian Airlines, said the company moved to a poison pill in anticipation of proposed amendments to the Canadian Airlines Corporation Act (Alberta). The reforms would lift the 10% ownership restriction on its common shares.
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Even with the pill, Canadian Airlines will still be subject to the provisions of the Canada Transportation Act, which restricts non-Canadians from owning more than 25% of the company's common shares.
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Canadian's plan calls for a potential bidder to make a "permitted bid" directly to all shareholders without prior board approval, keeping the bid open for at least 60 days.
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Eighty-two companies on the Toronto Stock Exchange 300 have poison pills, while another 118 smaller, TSE-listed companies have some form of shareholder protection plan. Since 1993, about 60 companies a year have introduced poison pills.
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Bill Mackenzie, vice-president of proxy review and director of Fairvest Securities Corp. in Toronto, said Friday the business corporations act is under serious review.
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"There are moves on to broaden the act, mainly increasing the amount of days on a takeover to 45," he said. "I think this proposed change is a good one because most agree 21 days is far too short a time frame."
The news of potential amendments to the CBCA and provincial acts is good for the Ontario Teachers' Pension Plan Board, which is still awaiting word on a two-year-old proposal it sent to several securities commissions, asking that the takeover time be increased.
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Ralph Shay, TSE vice-president of company listings and regulation, said he believes amendments to both acts are long overdue, even though he won't say what protection period he favors.
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Phil Anisman, a Toronto securities lawyer, said, "More time increases bid costs so I don't agree that amending the legislation is better. As well, this idea ignores the function that poison pills were alleged to be needed for and that is equal treatment for all shareholders."
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Inflation takes unexpected surge - By DAVID THOMAS - Economics Reporter The Financial Post
Despite biggest increase in three years, economist says 'Canada has nothing
to fear'
Inflation recorded its largest monthly advance in more than three years in January, lifting the year over year change in the consumer price index to 1.1% from 0.7% in December.
At 0.6% the increase was well above the 0.1% to 0.2% expected by most economists.
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While the surge surprised analysts, most still expect inflation to slow and remain near the bottom of the Bank of Canada's 1% to 3% target range in the months ahead.
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"The headlines scream price hikes but Canada still has nothing to fear from inflation," said Avery Shenfeld, senior economist at CIBC Wood Gundy Securities Inc.
He predicted the rate will remain about 1% to 1.5% and will not exceed 2% this year. Last year's average was 1.6%.
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Randall Powley, senior economist at Scotia Capital Markets, said his for an annual average inflation rate this year rose slightly on the news to 1.5%. Nesbitt Burns Inc. chief economist Sherry Cooper said "inflation is poised to average little more than 1% this year."
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January's higher prices came after several months of soft price reports and reflect some temporary factors. Cold and storms hampered growing conditions in the southwestern U.S. and Mexico, helping to send fresh vegetable prices soaring by 26.5%.
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Prices were also affected by the slide in the C$, which hit a historic low of US68.10› at the end of January.
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Other factors included an increase in local telephone rates in most provinces.
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One-sixth of the month's national inflation gain was the result of a one percentage point rise in Quebec's sales tax. As a result, the consumer price index in Quebec rose 1.2% in January, more than twice the average increase for all Canada.
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Currency traders initially greeted the news by bidding the C$ up to an intraday high of US70.41› on Friday. The prospect of rising inflation increases the likelihood the central bank will decide to raise interest rates. Higher rates slow economic growth but boost the value of the currency.
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However, the C$ gave back its gains as the market digested the report and played down the chance of a rise. It closed at US70.24›, down US0.16›.
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Higher rates of inflation have a negative effect on bonds, but some jitters in Friday's bond market were tied to events in the U.S., rather than fears over domestic inflation.
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Traders have bid bond prices up recently, sending yields down, in the belief the U.S. economy is set to slow. On Friday, some bullish economic news spooked this market.
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Industrial purchasing managers in Chicago reported no sign of a slowdown; in fact, prices paid for goods were higher than expected in February. Also, the University of Michigan said its consumer confidence index rose in February to its highest level ever.
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The benchmark 30-year U.S. treasury bond fell nearly a full point, boosting its yield at one point to 6.02%, its highest level since early December. The market later rallied, leaving the U.S. bond's closing yield at 5.92%.
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The Canadian long bond was also down for most of Friday but followed the U.S. market back up for a small gain to yield 5.79% at closing.
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In a topsy-turvy day, yields had earlier edged down on news fourth-quarter U.S. gross domestic product growth was revised to 3.9% from 4.3%. In 1997, U.S. GDP grew 3.8%, the strongest showing since 1988.
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