MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING WEDNESDAY, MARCH 4, 1998 (1)
Thursday, March 5, 1998
Wall Street took a breather after setting five-straight records as forecasts dimmed for U.S. earnings. Bay Street fought back under the weight of troubled bank shares to post a slight gain
U.S. stocks slipped from their record pace on concern that first-quarter earnings will fall short of forecasts.
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The Dow Jones industrial average fell 45.59 points, or 0.5%, to 8539.24, after setting five-straight records.
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More than 649 million shares changed hands on the Big Board, up from 615.1 million shares traded Tuesday.
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The Standard & Poor's 500 composite index lost 4.69 points, or 0.5%, to 1047.33.
The Nasdaq composite index rose 2.56 points, or 0.2%, to 1759.70, as semiconductor makers rebounded from three days of losses.
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Intel Corp. (INTC/nasdaq) rose US$11 1/88 to US$86 7/16 to pace the advance.
However, after the market closed the semiconductor giant said shocked the Street when it warned its first-quarter net income and revenue would fall well short of expectations. It now expects its first-quarter revenue to be about 10% below fourth-quarter revenue of US$6.5 billion.
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Analysts predict the warning could have a devastating impact on high-tech shares when the market opens again this morning
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Reaction in after-hours trading was quick and savage. Intel did not trade immediately, but Dell Computer Corp. (dell/nasdaq) fell US$8 to US$1311 1/82 after climbing US$73 1/84 to US$1387 1/88 earlier in the day.
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Walt Disney Co. (DIS/NYSE) led the Dow's decline, falling US$3 3/16 to US$1067 1/88 after analysts cut earnings estimates for the entertainment company.
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American Home Products Corp. (AHP/NYSE) fell US$2 13/16 to US$913 1/84, dragging other drugmakers down with it, after safety concerns caused it to withdraw its application for federal approval of its new hypertension drug. Merck & Co. (MRK/NYSE) fell US$11 1/84 to US$125 1/16.
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Canadian stocks fell, led by the country's largest banks, on expectations that robust economic growth may spark an interest-rate hike.
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The Toronto Stock Exchange 300 composite index rose 4.85 points to 7142.78, after tumbling as low as 7099 earlier in the session. The index is now 67 points short of its record high, reached Oct. 7, 1997.
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About 112 million shares changed hands on the TSE, up slightly from 111.6 million shares traded Tuesday.
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Canadian Imperial Bank of Commerce (cm/TSE) fell 85› to $44.50, Royal Bank of Canada (RY/TSE) slid 25› to $82.20 and Bank of Montreal (BMO/TSE) slipped 75› to $75.45.
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"The banks trade off bond yields and with bond yields creeping up, there is a tendency to see bank stocks underperform relative to other areas of the market," said Steve Bokor, a portfolio manager with Canadian Western Capital Corp.
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Petro-Canada (PCA/TSE) fell 55› to $26.15, and Canadian Occidental Petroleum Ltd. (Cxy/TSE) slipped 55› to $27.55 to lead energy issues lower, even as the Organization of Petroleum-Exporting Countries invited all 11 members to a committee meeting scheduled for March 16 in Vienna to discuss slumping oil prices.
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Nova Corp. (NVA/TSE) was the most actively traded stock on the TSE. It climbed 5› to $15.65 with more than 2.1 million shares changing hands. Nova has stretched out regulatory hearings on the proposed Alliance Pipeline project until at least mid-2000. Before the delay, completion was expected by the end of 1999.
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TrizecHahn Corp. said yesterday it plans to build a 50-storey office tower in downtown Toronto, the first new high-rise building in Canada's largest city in the past decade.
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TrizecHahn shares (TZH/TSE) fell 25› to $34.85.
Other Canadian markets fell.
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The Montreal Exchange portfolio lost 3.38 points to 3653.83.
The Vancouver Stock Exchange fell 1.34 points, or 0.2%, to 629.31.
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Major overseas markets ended mostly lower.
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London: Concern over a rise in British interest rates dragged down Europe's biggest stock market. The FT-SE 100 index lost 74.6 points, or 1.3%, to 5733.1.
Frankfurt: Germany's blue-chip Dax index lost 47.56 points, or 1%, to 4709.58.
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Tokyo: The 225-share Nikkei average dropped 72.73 points, or 0.4%, to 17,095.6.
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Hong Kong: The Hang Seng index fell 74.65 points, or 0.7%, to 11,350.81.
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Sydney: An 8% surge in the share price of resources giant Broken Hill Pty Co. Ltd. propelled the Australian share market above 2700 points for the first time in five months. The all ordinaries index rose 21 points, or 0.8%, to 2705.4.
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Foreign reserves near record level - By DAVID THOMAS - Economics Reporter The Financial Post
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A US$2-billion bond issue and a halt in the four-month tumble in the C$ allowed the Bank of Canada to increase its foreign reserves to a near-record level in February, the Finance Department said yesterday.
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Canada's foreign reserves increased by US$3.31 billion to reach US$21.31 billion, close to the record US$21.6 billion in March 1997. They hit a recent low of US$17.97 billion in December.
Last month was the first since September in which the central bank did not draw on its reserves to defend the currency in the open market.
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After running a C$ defence tab of US$5.7 billion in the previous four months, the bank actually added US$197 million through its official operations, which are primarily market interventions.
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The C$ gained about US1 1/2› in February after falling from nearly US73› in October to a record closing low of US68.25› in late January.
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The C$ closed yesterday at US70.34›, up US0.03›. It traded as high as US70.67› on Monday when Daniel Johnson announced he would step down as leader of the Quebec Liberal party.
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Currency traders said the C$ could come under renewed pressure in the lead-up to the next election and possible referendum in Quebec.
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The prospect of Johnson's replacement with a more effective challenger to Premier Lucien Bouchard's sovereignty plans would be seen as a big plus for the currency.
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The market's top pick, federal Progressive Conservative leader Jean Charest, has said he is not interested in the job.
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