MARKET ACTIVITY REVIEW / Friday 092598 Closing Report
CANADA
Jitters about the ramifications of the bailout of a large U.S. hedge fund prompted investors to jump off the Canadian equities bandwagon on Friday for the relative safety of gold.
Toronto stocks closed the week in negative territory as investors fretted over the ramifications of a large U.S. hedge fund experiencing financial difficulties.
The Toronto stock market showed signs of promise earlier in the week when it tacked on three days of gains, including a 192-point rise on Wednesday, before falling off the rails on Thursday and Friday.
On the week the TSE 300 gained 74 points or 1.3 percent. It is still well off its year high of 7835.74, reached in late April.
The downturn came after investors became spooked by the news on Thursday that the large U.S. hedge fund, Long-Term Capital Management LP, was in financial difficulty due to a series of money-losing investments.
Yesterday, the key Toronto Stock Exchange 300 Composite Index fell 46.39 points or 0.8 percent to close at 5845.98. Volume was 104.7 million shares worth C$1.65 billion. Advancers equaled decliners at 492 with another 264 issues unchanged.
Overall in Toronto, eight of the TSE 300's 14 subindexes closed in negative territory, led by a 2.7 percent dip in the heavily weighted financial services sector and a 1.5 percent drop in the merchandising sector.
The U.S. Federal Reserve and several banks stepped in to bail out the hedge fund with more than $3.75 billion in aid.
''Today we saw the spillover from yesterday's announcement about (the hedge fund),'' said Todd Kapala, an investment specialist at Priority Brokerage in Toronto.
Canadian stocks fell, led by major banks, after the near collapse of U.S. hedge fund Long-Term Capital Management LP sparked speculation that earnings growth may slow more than expected. ''People are very leery about the financial-services sector right now. It was really our financial services that got hit today. It accounted for most of the drop.''
Kapala estimates that the next two quarters will expose other funds that ''really did make mistakes along the way.''
"I don't think the worst is over in terms of banks' exposure to emerging markets and derivatives operations," said Martin Roberge, an asset allocation analyst at Levesque Beaubien Geoffrion Inc. in Montreal.
Bank of Montreal (BMO/TSE) fell $2.50 to $57.40, Royal Bank of Canada (RY/TSE) lost $1.80 to $63.25, Toronto-Dominion Bank (TD/TSE) dipped $1.45 to $41.70, Canadian Imperial Bank of Commerce (CM/TSE) tumbled 90¢ to $29.05 and Bank of Nova Scotia (BNS/TSE) fell 55¢ to $25.05.
Among merchandising stocks, department store chain Hudson's Bay dropped C$0.40 to C$17.85 and Loblaw Cos. Ltd. (L.TOTSE) fell C$1.15 to C$32.15.
Tempering the losses was the gold and precious minerals index, which closed out the day with a 2 percent gain. Earlier in the day the gold group climbed as high as 5.5 percent. The early strength in gold prices was attributed to strong fund short-covering, with central banks believed to be calling in loans of bullion in response to the weakening economic climate around the world..
Kapala noted that in times of uncertainty, investors will once again seek the safety of the yellow metal. ''With the fact that there is some uncertainty surrounding the U.S. situation and with the U.S. dollar not being as strong as it once was, people are more willing to look at gold once again,'' he said.
The price for gold in London rose $5.45 to $298.10 an ounce. Gold miner Teck Corp. Ltd. (TEKb.TSE) rose C$0.55 to C$13.95, Barrick Gold Corp. (ABX/TSE) rose 30¢ to $31, Placer Dome Inc. (PDG/TSE) gained 45¢ to $21.65 and Kinross Gold Corp. (K/TSE) jumped 36¢ to $4.75.
Alcan Aluminium Ltd. (AL/TSE) rose 70¢ to $37.50 after it said it would buy back as much as 10% of its outstanding stock.
The oil & gas composite index fell 1.1% or 56.54 to 5327.16. Among the sub-components, the integrated oils fell 1.6% or 123.94 to 7608.25. The oil & gas services fell 1.0% or 46.91 to 4834.07. The oil & gas services index gained 0.8% or 11.15 to 1495.88. The price of crude oil for November delivery slipped US23¢ to US$15.75 a barrel in New York.
Amber Energy, Jet Energy, Blue Range Resources, Petro-Canada, Canadian Natural Resources, Talisman Energy and Renaissance Energy were among the top 50 most active on the TSE.
Although producers were totally absent among the top 50 gainers, the service companies Mullen Transportation gained $1.00 to $15.00 and Precision Drilling $0.85 to $19.75.
Among leading percentage gainers, Richland Petroleum gained 14.3% to $2.00, Blue Range Resources 8.2% to $5.25, Benson Petroleum 7.5% to $1.00, Bow Valley Energy 7.5% to $1.29, Mullen Transportation 7.1% to $15.00 and Elk Point Resources 6.7% to $3.20.
On the downside, Canadian Occidental fell $1.15 to $26.00, Talisman Energy $1.15 to $33.15, Denbury Resources $0.90 to $10.50, Dreco Energy Services $0.85 to $17.20 and Alberta Energy $0.65 to $35.00.
Percentage losers included Danoil Energy 19.0% to $0.81, Stellarton Energy 17.2% to $2.40, Denbury Resources 7.9% to $10.50, American Eco 5.7% to $3.30 and Tethys Energy 5.7% to $1.65.
Air Canada (AC/TSE) fell 35¢ to $6.50 after estimating the financial impact of the 13-day pilots' strike to be $290 million. The firm said it will post a loss in the third and fourth quarters.
The Alberta Stock Exchange gained 2.08 points to 1743.46 on volume of 8.1 million shares. 126 issues advanced, 106 issues declined with another 111 issues unchanged.
Among oil related issues, Total Energy Services, J&L Capital, ICE Drilling, First Star Energy, Bearcat Exploration, Veteran Resources, Anvil Resources, Oilexco, Alta Pacific Capital, Gopher Oil & Gas and Doreal Energy were among the top 25 most active.
Top gainers included Niko Resources $0.35 to $3.70, Edge Energy $0.15 to $3.30, Ionic Energy $0.15 to $1.65, Westlinks Resources $0.11 to $0.36, Belair Energy $0.10 to $0.30, Grace Resources $0.10 to $0.20 and Solid Resources $0.10 to $6.10.
On the downside, Derrick Energy fell $0.25 to 2.00, Danoil Energy $0.20 to $0.80, Sundance Resources $0.15 to $0.35, Veteran Resources $0.15 to $0.45, HEGCO Canada $0.11 to $1.90, Progress Energy $$0.10 to $1.40, Total Energy Services $0.10 to $0.80, Corlac Oilfield $0.09 to $0.60. Esker Resources $0.09 to $0.36, Golden Trend Petroleum $0.09 to $0.31, First Star Energy $0.09 to $0.46, Hawk Oil A $0.06 to $0.84 and Red Sea Oil $0.06 to $1.14.
The Montreal Stock Exchange fell 34.29 points, or 1.3%, to 3004.04. For the week, it rose 41.53 points or 1.4%.
The Vancouver Stock Exchange, rose 3.69 points, or 0.9%, to 404.51. For the week, it fell 0.28 of a point.
U.S.
Stocks Rebound On Interest-Rate Hopes
Blue-chip stocks recovered from an early stumble Friday, as hopes for an interest-rate cut helped investors put aside worries about the bailout of hedge fund Long-Term Capital Management. The dollar rebounded after dipping to a 19-month low against the mark, and bonds advanced.
The Dow Jones Industrial Average rose 26.78, or 0.3%, to close at 8,028.77 after plunging more than 100 points in early trading.
Other major indexes finished mixed. The Standard & Poor's 500-stock index gained 2.03 to 1,044.75 but the New York Stock Exchange Composite Index eased 0.91 to 515.68. Smaller issues also remained weak, with the Russell 2000 small-stock index down 1.23 to 369.02. On the Big Board, 1,573 stocks declined and 1,451 advanced. Volume stood at 725.9 million shares.
But the Nasdaq Composite Index, laden with technology shares, jumped 23.25, or 1.4%, to 1,743.59. Computer-related shares fueled the tech rally, after Michael Dell, head of Dell Computer (DELL), issued a bullish outlook for both his company and the PC industry as a whole. Dell's shares finished up 2 3/4 to 66 1/16, while the Morgan Stanley high-technology index climbed 10.04 to 598.01.
Investors expecting Wall Street to join the global market rout Friday were encouraged when the Dow industrials quickly snapped back from their early tumble. Edward Collins, an executive vice president at Daiwa Securities America, said the market had been looking a little oversold and that Friday's recovery reflected that.
Increasing certainty that economic turbulence overseas will convince Federal Reserve policy makers to reduce rates to stimulate the U.S. economy fueled the rebound, said Alfred Goldman, director of technical research at A.G. Edwards & Sons. Fed policy makers are set to meet on Tuesday. "The market is anticipating a cut next Tuesday and that's brought a lot of buyers back into the market," he said.
The bank sector, which would be the most direct beneficiary of an interest-rate cut, rallied back from Thursday's sell-off. Bank and brokerage-firm stocks fell sharply in late trading Thursday in the wake of the $3.5 billion rescue package for U.S. hedge fund Long-Term Capital Management.
The threat of collapse at Long-Term Capital had raised concerns on Wall Street that other hedge funds may be suffering similarly devastating losses. Investors also grew fearful that major money - center banks and financial institutions may be exposed to the fallout, traders said.
Those fears were reinforced after Swiss bank UBS became the first to announce it would have to write down hundreds of millions of dollars against income because of its investment in Long-Term
Despite Friday's bounce, Boynton Hussey, market strategist at Rauscher Pierce Refsnes in Dallas, warned that the financial sector remains extremely vulnerable.
"I would hesitate to say that this storm is over, in fact it's just beginning to start unfolding," he said. "It remains to be seen whether there are other entities that are having similar problems we're not hearing about yet." Mr. Hussey added that the Federal Reserve's involvement in coordinating the rescue package pointed to the severity of the problem.
U.S. Treasury bonds, typically seen as a safe-haven investment in times of global financial crisis, attracted buyers seeking shelter from weak global stock markets. The bellwether 30-year bond rose 1/2 point, or $5.00 per $1,000 bond. Its yield, which moves in the opposite direction of its price, dropped to 5.12%.
The benchmark 30-year Treasury bond added 1/2 point, or $5.00 for each $1,000 face amount. Its yield, which moves in the opposite direction of its price, stood at 5.12%.
The dollar was quoted at 1.6789 marks and 136.27 yen, compared with 1.6740 marks and 134.93 yen late Thursday in New York.
World-wide, stocks fell in dollar terms. The Dow Jones World Stock Index was down 1.35 to 171.27 as of 5 p.m. EDT.
Technology stocks
Cirrus Logic (CRUS) fell 1 7/32, or 17%, to 6 1/16 on the Nasdaq Stock Market, after the struggling computer-chip maker announced it will phase out certain businesses and lay off 400 to 500 employees as part of a restructuring that could result in charges of as much as $500 million for its fiscal second quarter.
Barnes & Noble (BKS) rose 1/2 to 27 7/16 on the Big Board. The bookseller's online unit late Thursday filed for an initial public offering of $100 million in stock.
Micron Technology (MU) rose 3 or 9.7%, to 34 on the Big Board as several trading sources cited a trade magazine's report that Intel (INTC) is negotiating a minority equity stake in the chip maker. Spokesmen from the companies weren't immediately available to comment on the report published on the Internet by CMP Media's Electronics Buyers' News (www.ebnews.com). The stock started its rise after a press release on the story was issued around 2:30 p.m. EDT Thursday.
Remedy (RMDY) added 1/16 to 9 1/16 on Nasdaq, even though SoundView Financial cut its rating on the stock to short-term "hold" from short-term "buy."
Active issues
Oil and natural gas producers advanced as Hurricane Georges threatened to disrupt shipping and production in the Gulf of Mexico. Chevron Corp. (CHV/NYSE) rose US$1 3/16 to US$83 3/8 and Mobil Corp. (MOB/NYSE) gained 15/16 to US$77 5/8.
Olin (OLN) dropped 2 5/8 to 26 1/4. The company, citing the impact of the Asian economic crisis, said it expects to report third-quarter earnings before charges of about 40 cents a share, below analysts' estimates of 63 cents a share. The chemicals, electronics and defense company said the lower expectations reflect poor performance by its chlor-alkali and microelectronics businesses. In the year-earlier period, Olin reported net income of 75 cents a diluted share. The Norwalk, Conn., company said it expects to take a charge of 55 cents a share in the quarter.
Unifi (UFI) dropped 4 1/2 to 16 15/16 after it announced it expects its first-quarter net income to be about 36 cents a share, 20% below the 45 cents a diluted share the company earned a year ago. Analysts surveyed by First Call estimated the upholstery manufacturer would earn 48 cents a share. Unifi blamed the shortfall on the General Motors (GM) strike, lower demand from its North American apparel sector and competitive pricing pressures that resulted from the Asian financial crisis.
American depositary receipts of Glaxo Wellcome (GLX) slid 2 15/16 to 57 3/4. Goldman Sachs downgraded its investment rating on the British pharmaceutical company to "hold" from "buy" and cut its forecasts for 1998 and 1999 earnings.
Small-capitalization stocks
RIT Technologies (RITTF) , an Israeli maker of wiring products and premise and local loop connectivity management systems, lost more than half its market value, plummeting 2 13/16, or 56%, to 2 3/16. RIT said it expects to report a third-quarter loss on revenues of about $5.4 million, which is short of analysts' expectations. RIT attributed the revenue shortfall and associated loss to the Russian currency crisis and its decision to end data communications product shipments in that market.
Information Analysis (IAIC) plunged 1 13/16, or 48%, to 1 15/16 after the Fairfax, Va., software and information-systems concern said it will post a third-quarter operating loss of about $2 million.
Quaker Fabric (QFAB) dove 4 1/32, or 45%, to 4 31/32. The Fall River, Mass., upholstery fabric company said its third - and fourth - quarter earnings will fall "significantly below" analysts' estimates. Quaker Fabric said year 2000 systems - related problems contributed to a decrease in production rates and manufacturing output.
The American depositary receipts of Nice Systems (NICEY), an Israeli maker of digital recording and retrieval systems, slid 11 3/16, or 38%, to 18 5/8. Nice said third-quarter results will fall short of analysts' expectations, with revenue falling 10% to 15% below second-quarter levels.
Garden Ridge (GRDG) dropped 2 5/8, or 25%, to 7 13/16. The president and chief operating officer of the Houston home-decor retailer, Jack E. Lewis, resigned to pursue other interests.
INTERNATIONAL
Asian markets moved mostly lower amid worries about potential fallout from the near-failure of Long-Term Capital and amid concerns about Thursday's losses on Wall Street. Tokyo's Nikkei 225 average shed 3.4%, while the market's banking sector fell 4.2% as opposition parties rejected the Liberal Democratic Party's latest compromise proposal to stabilize the country's banks.
Elsewhere, stocks fell 1.7% in Hong Kong.
European markets followed Asia's lead, as several markets dropped more than 2%. Many major indexes closed the day above their session lows, though, as Wall Street stabilized after its initial drop on Friday. Stocks fell 2.1% in London, 3.5% in Germany and 1.4% in Switzerland.
Stocks traded mixed in the Americas region, as the Dow Jones Industrial Average's modest afternoon gains helped to ease the nervousness felt early in the day. Mexican and Argentine stocks managed gains, while Brazilian issues fell 1.9%. |
