MARKET ACTIVITY / TRADING NOTES FOR DAY ENDING TUESDAY JUNE 9 1998 (1)
MARKET OVERVIEW
Resource stocks pull Toronto market down
Weakening resource-based stocks put an abrupt end to the Toronto Stock Exchange's two-day rally on Tuesday. The Canadian stock market gave back some of the previous two sessions' gains as a golds-led selloff in resources ended in a modest loss.
On Bay Street, the Toronto Stock Exchange 300 composite index fell 21.76 points, or 0.3%, to 7535.43. Today's halt brought the Toronto market's two-day rally to a screeching halt. Yesterday the market gained 48.96 points or 0.7 percent to 7557.19 adding to Friday's 22.84-point gain. Volume was 107 million shares, up from Monday's total of 74.4 million shares, and trading value jumped to $2.27 billion from $1.20 billion. Advancers lagged decliners 407 to 628 with another 297 shares unchanged Toronto's key index performed in line with the Dow Jones industrial average in New York.
Overall in Toronto, nine of the TSE 300's 14 subindexes closed in negative territory led by a drop in the influential gold and precious minerals index. The August price for Comex gold dropped $2.90 to $295.50 after the European Central Bank said it would likely hold less gold in its reserves than the market expected.
Trading has been cautious over the past few sessions, with many investors sitting on the sidelines ahead of congressional testimony by U.S. Federal Reserve Chairman Alan Greenspan today.
"The culprit was natural resources," said Pat Blandford, senior vice-president at Midland Walwyn in Toronto. "The rocks, the trees, the oil, the gas, the gold." "That's not enough to write home about," Blandford said.
The problem Tuesday at the TSE was not a new one. World commodity prices have been depressed for almost a year and that has created a big drag on the natural resource stocks. "We're bouncing around near the bottom," Blandford said.
On the TSE, the gold and precious metals subindex posted the biggest decline, dropping 2.1%, after trading higher in the morning session. Investors bid prices lower after the European Union policy-making body indicated the new European central bank could hold only between 10% and 15% of its reserves in gold when traders were hoping for a higher percentage. ECB president Wim Duisenberg said on Tuesday after the inaugural meeting of the central bank council that it had reached consensus that between 10 to 15 percent of the central bank reserves will be in gold. The market was expecting the ECB to hold between five and 30 percent.
This news drove another stake into the slumping gold sector which has dropped almost 16 percent in the past month and 32.4 percent in the past year. "The meeting in Europe had some people on edge," said Craig Strachan, manager of research services at TD Evergreen in Toronto. Gold heavyweight Barrick Gold Corp. led the gold producers lower on the Toronto Stock Exchange slipping C$0.95 to $27.35. Placer Dome Inc. dropped $0.55 to C$17.90 and Euro-Nevada gave up 35 cents at $21.75.
Investors will also be watching closely tomorrow's testimony by U.S. Federal Reserve chairman Alan Greenspan on interest rates, traders said. "Nobody wants to make a big bet on the market" until hearing Greenspan's latest view on the pace of economic growth in the U.S., said Martin Roberge, technical analyst at L‚vesque Beaubien Geoffrion Inc.
Strachan said the volatility in the markets can be expected for some time as investors look for direction. "We just keep going back and forth, back and forth. We're definitely in a trading range until something concrete comes forward," Strachan said.
Meantime, the TSE oil and gas composite index dropped 1.2% or 74.93 to 6144.56 - as crude oil prices retreated. Among the sub-components, the integrated oils fell 1.3% or 111.83 to 8611.04. The oil and gas producers index also fell 1.3% or 5380.28 and the oil and gas services was down 0.3% or 8.25 to 2598.2
Pinnacle Resources, Tarragon Oil & Gas, Renaissance Energy, Ulster Petroleum, Abacan Resources, Ranger Oil and Poco Petroleums were among the top 50 most active on the TSE. Among service firms, Canadian Fracmaster was also listed among the top fifty most active.
Canadian Occidental Petroleum fell $0.55 to $29.70, Suncor Energy $0.55 to $52.00, Anderson Exploration $0.50 to $16.50, Seven Seas Petroleum (U) $0.50 to $22.50, Talisman Energy Inc. $0.50 at $40.00 and Petro-Canada $0.45 to $23.90. Among service companies, American Eco fell $0.60 to $10.40 and Computalog $0.55 to $19.00.
There were no oil producers listed among the top 50 net gainers on the TSE. However, companies which reversed the downward treand in the service sector included Shaw Industries up $0.80 to $17.40, Dreco Energy $0.45 to $51.10 and Akita Drilling $0.40 to $10.80.
The base metals sector gave up 1.1%, with Alcan Aluminium Ltd. (AL/TSE) falling 50› to $41.75, and Noranda Inc. (NOR/TSE) closing down 40› at 24.85.
The paper and forest products and pipelines groups also lost ground.
Bucking the negative trend were the consumer products, transportation and utility groups.
Among the transport stocks, CN Rail jumped $1.90 to $84.10, Air Canada added 40 cents to $13.35 and Laidlaw Inc. closed at $18.75, up 15 cents.
Among industrials, Nortel gained $2.20 to $94.70; Stratford Software Corp. lost $2.00 to $55.00.
Among mines, Dia Met Class B rose 45 cents to $23.20.
In other Canadian markets, the Montreal Exchange portfolio index fell 14.97 points, or 0.4%, to 3860.66. And the Vancouver Stock Exchange dropped 4.31 points or 0.8% to 573.81. The combined value index of the Alberta Stock Exchange fell 13.63 to 2220.19. 139 issues advanced, 154 declined and 144 issues were unchanged.
Prices were lower in light trading on the Canadian bond market Tuesday.
The two-year bonds were $0.02 lower at $99.74. Ten-year bonds were
$0.15 lower at $113.45. Long-term bonds were $0.15 lower at $132.50.
The Government of Canada bond carrying an eight per cent coupon and
maturing in 2023 a barometer of long-term borrowing costs, was yielding 5.57 per cent.
Day-to-day money was available at 4.70 per cent.
U.S. markets closed mixed despite a record-breaking performance by the transportation sector.
On Wall Street, a terrific session for transportation stocks overshadowed a modest performance by most blue-chip names, and put an appealing gloss on an otherwise unremarkable trading session.
Airline stocks logged steep gains in the session. US Airways Group Inc. (U/NYSE) shot up US$5 3/16 to US$75 1/8. AMR Corp. (AMR/NYSE), parent of American Airlines Inc., jumped US$6 to US$162. Delta Air Lines Inc. (DAL/NYSE) soared US$4 13/16 to US$125 1/2.
Investor attention was drawn to the group by a conference on airline stocks organized by Merrill Lynch & Co., at which industry analysts raved about the strong traffic data airlines posted for May.
The Dow Jones transportation average logged a record point gain, rising 104.33 points to finish at 3461.71. The gain topped the previous best, the 100.26-point advance set last Dec. 30. But on a percentage basis, yesterday's 3.11% rise was only the third-best ever.
Away from the transports, there was little to cheer. A handful of blue-chip stocks, among them some recent gainers, edged lower yesterday, as major market averages remained locked in the tight trading ranges they occupied in recent sessions.
Tech stocks were paced by the resurgent Internet sector, where several stocks posted impressive gains. Outside of technology, drug makers and transportation stocks were strong performers, the latter benefiting from weakness in the oil sector. Banking stocks joined the oil names as the big drag on major market indexes.
With many hi-tech industry bellwethers on the rise, the Morgan Stanley High Tech Index (MSH) climbed 9.44 to 560.74 and the Nasdaq 100 Index (NDX) rose 16.46 to 1,223.48.
Some big gainers on the day included Dell Computer (DELL), up 1 13/16 to 85 1/2 while Compaq Computer (CPQ) rose 13/16 to 29 1/2. The world's largest PC maker also had a hand in helping other stocks rise on the day.
SyQuest Technology (SYQT) rose 5/16 to 1 11/16 in much higher than normal volume after the maker of computer hard drives said it signed a three-year agreement with Compaq to incorporate its SparQ removable cartridge hard drive into Compaq's new configure-to-order program.
Meanwhile, Iomega (IOM) said its Zip drives will be included as standard features in the majority of new Compaq Presario PCs. Iomega shares fell 7/16 to 6 9/16, however.
Yahoo! (YHOO) gained 8 1/2 to 117 7/8 on news it has signed a distribution agreement with Compaq to make "My Yahoo!" the default start page for the Internet services offered by Compaq's new Internet PC.
Yahoo! paced the AMEX Internet Index (IIX), which rose 8.45 to 336.90.
Lycos (LCOS) jumped 3 5/16 to 53 9/16 as the company was issued a patent for its "spider" Internet-search technology.
America Online (AOL) climbed 3 3/4 to 88 9/16 after J.P. Morgan initiated coverage of the company with a "buy" rating.
Cnet Inc. (CNWK) jumped 12 1/8 to 45 1/8 as General Electric's (GE) NBC unit said it agreed to buy a 5% stake in the company and a minority stake in its Snap! online service.
Netscape Communications (NSCP) rose 1 3/8 to 24 3/16 on news that president and CEO James Barksdale purchased 300,000 shares of the company's stock on June 1.
Among other active issues
American Express (AXP), which paced the Dow's gain Monday, led the index lower, falling 2 1/16 to 107 3/8, while J.P. Morgan (JPM) shed 15/16 to 122 3/4.
The Philadelphia KBW Banking Index (BKX) fell 5.12 to 852.06 in the wake of a troubling reaction to yesterday's $34 billion merger agreement between Wells Fargo (WFC) and Norwest (NOB). Wells Fargo shares tumbled 12 3/4 to 353 and Norwest lost 7/8 to 35 15/16.
Also weighing on the banking index was Chase Manhattan Bank (CMB), which slid 1 3/4 to 141 9/16.
Other names weighing on the Dow included McDonald's (MCD), down 1 1/4 to 66, 3M (MMM), off 1 5/16 to 92 7/8, and DuPont (DD), down 1 5/8 to 78 3/16.
Exxon (XON) fell 1 5/16 to 69 7/8 and Chevron (CHV) dipped 1 to 80 as oil producers suffered. The AMEX Oil Index (XOI) shed 6.32 to 470.96 while the Philadelphia Oil Service Index (OSX) lost 2.21 to 97.96.
Among other names in the oil patch, St. Maryland Exploration (MARY) tumbled 3 1/16 to 23 1/16; Smith International (SII) fell 1 3/4 to 43 1/2; and Kerr-McGee (KMG) lost 1 5/16 to 59 13/16.
Pfizer Inc. (PFE) rose 4 to 112 7/16 after the U.S. Food and Drug Administration said Viagra wasn't found to be the direct cause of death in any of the 16 deaths reported in patients using the impotency drug.
Pfizer led the AMEX Pharmaceutical Index (DRG) up 7.95 points to 651.20. Dow member Johnson & Johnson (JNJ) further aided the sector, rising 1 3/16 to 72 1/16.
Pre-announcement season is here and several stocks were hit by profit warnings.
Polaroid Corp. (PRD) fell 5/16 to 39 1/16 after warning that its second-quarter earnings will not meet expectations.
Other names hit by separate profit warnings included: Arrow International (ARRO), which fell 4 3/4 to 30 5/16; Stein Mart Inc. (SMRT), down 3 3/16 to 11 13/16; Billing Concepts (BILL) off 2 15/16 to 15 1/16;
Bridgestreet Accommodations (BEDS), which sank 4 to 5 1/4; and CyberOptics (CYBE), down 2 5/8 to 13 3/8.
Chromatics Color Sciences International (CCSI) fell 2 5/16 to 6 1/2 after Asenio & Co., which specializes in short-selling stocks, suggested the company has exaggerated the size of the market for its products, which test infants for jaundice.
Telebras (TBR) fell 2 1/16 to 115 5/8 after Brazil delayed until tomorrow the disclosure of the minimum sale price for the phone company.
Tommy Hilfiger (TOM) fell 3 5/8 to 60 5/16 after saying its order backlog at the end of the fiscal fourth quarter was less than expected.
SangStat Medical (SANG) gained 2 13/16 to 28 1/4 upon obtaining a
"buy" rating in new coverage at Salomon Smith Barney.
ESC Medical Systems (ESCMF) jumped 1 13/16 to 33 1/4 after being added to the "recommend list" at Goldman, Sachs.
HBO & Co. (HBOC) rose 2 5/16 to 62 1/16 after Bear Stearns reiterated a "buy'' rating on the company.
Clorox (CLX) rose 2 7/16 to 86 3/4 thanks to a new "buy" rating from Brown Brothers Harriman.
McKesson Corp. (MCK) rose 2 to 80 3/4 on word it has extended for five years its existing contract with Omnicare (OCR), which closed off fractionally.
Metamor Worldwide (MMWW) rose 1 5/16 to 33 after agreeing to sell its Corestaff unit to British Corporate Services Group for $250 million.
Simula (SMU) rose 2 5/8 to 16 7/8 after TRW (TRW) said it will use Simula's product for its side-impact safety systems.
Tootsie Roll Industries (TR) closed up 2 3/16 to 79 15/16 after the candy maker rolled out a 2-for-1 stock split.
The Dow Jones Industrial Average ($INDUA) stayed in a tight range in negative territory throughout the session, but closed well off its worst levels of the day. The blue-chip proxy fell to as low as 9,014.54 before closing off 19.68 at 9,049.92.
Conversely, the Dow transports ($TRAN) soared 104.33 to 3,461.71 as weakness in the oil patch sent airline stocks skyward.
The Nasdaq Composite Index (COMP) rose as high as 1,801.04 before closing up 12.99 to 1,800.76.
The S&P 500 gained 2.70 to 1,118.42 while the Russell 2000 Index rose a fraction of a point to 456.74.
In NYSE trading, 564 million shares changed hands while advancing issues trailed declining issues by a 4-to-3 margin. In Nasdaq activity, 725 million shares were exchanged while the breadth of the market favored declining stocks by an 11-to-10 spread.
Bond prices remained in a tight range ahead of Greenspan's speech tomorrow. Bond prices rose fractionally while the yield on the benchmark 30-year Treasury bond was unchanged at 5.78%.
Among the Dow blue-chip losers were American Express Inc. (AXP/NYSE),down US$2 1/16 to US$107 3/8, and J.P. Morgan & Co. (JPM/NYSE), off 15/16 at US$122 3/4, after each moved higher Monday.
"When a sector moves up to a certain level, investors start to sell into the strength," said James Herrick, managing director of trading at Robert W. Baird. "That's why this market is stuck in the trading range it's in.
"It's a very noncommittal market," he said.
That is reflected in the technical performance. Volume levels remain modest, and even though yesterday's volume of 560.5 million shares beat out Monday's 533.6-million share total on the NYSE, the days where volume levels topped 600 million shares a day have become the exception, not the rule, as it was earlier this year.
International Stocks
U.S. rate fears keep European markets on edge
European stocks fell yesterday amid concern U.S. Federal Reserve Chairman Alan Greenspan may hint at raising interest rates.
Greenspan will address the joint economic committee of Congress today. While he may hint at raising rates, some investors expect that with Japan about to confirm it is in recession, other Asian economies teetering on the edge and U.S. inflation at its lowest in a generation, an increase will be difficult to justify.
London: British shares drifted lower, undercut by a weak Wall Street. The FTSE 100 index closed at 6019.8, down 18 points, or 0.3%.
Merger speculation buoyed the likes of insurers Commercial Union and Legal & General and drugs company Glaxo Wellcome PLC. CGU rose 41 pence to 1,168p, Legal & General rose 10p to 708p and Glaxo rose 49p to 1,763p.
Frankfurt: The Dax index closed at 5760.03, down 19.06 points, or 0.3%. In later screen-based trade the Xetra Dax ended at 5773.77, down 13.28 points or 0.2%. BMW AG and rival Volkswagen AG reversed course in the wake of Vickers PLC's shareholders backing VW's bid for Rolls-Royce Motor Cars Ltd. VW edged ahead 9 marks to 1,525 marks, while BMW sank 70.4 marks to 1,960.6 marks.
Tokyo: Japanese shares advanced as the yen's fall against the US$ (before its rise in New York) prompted investors to pick up shares in export-driven manufacturers. The 225-share Nikkei average closed up 235.46, or 1.5%, to 15,530.17.
Hong Kong: Investors dumped China-related shares on fears a weak yen would trigger a devaluation of the Chinese yuan. The Hang Seng index closed at 8391.46, down 195.17 points or 2.3%.
Sydney: Shares ended lower on fears rates may be hiked to defend the ailing A$. The all ordinaries index closed at 2623.9, down 18.9 points, or 0.7%.
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