Proactive investors

Dow dips below 8,000 as selling gathers pace

by Proactiveinvestors

North American markets gave away yesterday’s gains and fell precipitously as sellers dominated yet another day. Dow fell 427 points or 5 percent to close 7,997. Both S&P 500 and NASDAQ also declined 53 points (6.1 percent) and 97 points (6.5 percent) to close at 807 and 1,386 respectively. Both Dow and S&P are trading at their lowest levels since March 2003. Matters were no different in Toronto and Metals and Financials dragged TSX down 345 points or 4 percent to close at 8,490. TSX venture index also fell 30.2 points to close at 730. The Canadian dollar fell sharply against the US dollar by 1.48 cents to close at 79.83 cents.

Recession fears and the plight of automakers were the main concerns that engulfed the US market. The possibility of not receiving a rescue package prompted investors to sell General Motors (NYSE: GM) and Ford Motor Co (NYSE: F). General Motors fell 9.7 percent while Ford tumbled a whopping 25 percent to close at $1.26.

Adding to the pessimism, the Federal Reserve cut its forecast on economic activity and even hinted further rate cuts. The Fed also indicated unemployment rate to climb higher to between 7.1 percent and 7.6 percent. The new economic forecast suggests no growth or 0.3 percent growth for this year while a more sober 0.2 percent contraction next year. Meanwhile, consumer prices released by the Labour Department showed a 1 percent fall in October, marking the largest drop in 61 years. Falling consumer prices is now fuelling deflation fears.

Financials
The rout is led by financials and Goldman Sachs (NYSE: GS) was at the centre of attraction following its 11 percent drop to close at $55.18. Weak profit outlook prompted selling and Goldman Sachs is now trading at its lowest price since the IPO in 1999. Its peers such as Morgan Stanley (NYSE: MS) and Merrill Lynch (NYSE: MER) also fell 14.8 percent and 15.8 percent to close $10.25and $9.60 respectively. Agony continued at Citigroup (NYSE: C) as it fell a further 23.4 percent to $6.40. JPMorgan Chase (NYSE: JPM) and Bank of America (NYSE: BAC) also fell 11.4 percent and 14 percent respectively.

Banks fell across the board in Toronto as well and the sector closed 4.9 percent lower. The Bank of Nova Scotia (TSX: BNS) issued a larger-than-expected write down of $595-million to 4Q2008 earnings relating to certain trading activities and valuation adjustments. Scotiabank fell 5.2 percent or $1.93 to close at $35.24. Bank of Montreal (TSX: BMO) declined $2.50 to $38.00. TD Bank (TSX: TD) and CIBC (TSX: CM) also fell 4.3 percent and 5. percent to close $49.93 and $48.29. Royal Bank (TSX: RY) also weakened $2.35 or 5.4 percent to $41.19.

Energy

In the face of weakening economies light, sweet crude closed lower again, falling $0.77 to settle at $53.62 a barrel on the New York Mercantile Exchange. EnCana Corp. (TSX: ECA) fell 2.62 percent to $51.21 while Suncor Energy Inc. (TSX: SU) fell $1.05 or 4.52 percent to $22.20. Petro-Canada (TSX: PCA) and Canadian Natural Resources (TSX: CNQ) also fell $0.91 and $1.43 to close $24.49 and $45.14 respectively. Husky Energy (TSX: HSE) also fell 6.6 percent to close at $32.45.

In the US Exxon Mobil Corp. (NYSE: XOM) fell $2.91 to close at $73.42 while Chevron Corp. (NYSE: CVX) fell $2.79 to reach $70.61. ConocoPhillips (NYSE: COP) and Marathon Oil (NYSE: MRO) fell $3.55 and $1.19 to close at $46.34 and $24.11 respectively. BP plc (NYSE: BP) also edged down $2.13 to close at $43.38. Devon Energy (NYSE: DVN) the unconventional gas player also fell $2.38 to reach $68.57.

Metals

The metal sector continued to weaken and that was one major contributory factor for the weakness in Toronto. The gold bullion gained $3.30 to close US$736.00 an ounce on the New York Mercantile Exchange. The TSX gold sector however fell 2.8 percent. Goldcorp Inc. (TSX: G) fell $0.75 to $23.35 while Barrick Gold Corp. (TSX: ABX) added $0.74 or 2.9 percent to reach $26.49. Kinross Gold (TSX: K) fell $0.84 to $13.94. In the US, Newmont Mining (NYSE: NEM) fell $1.25 or 5.3 per cent to close at $22.40. AngloGold Ashanti (NYSE: AU) also weakened 7.1 percent. Goldfields (NYSE: GFI) followed suit to record a 8.94 percent decline to close at $5.60.

Slide continues at Teck Cominco Ltd. (NYSE: TCK) as it fell another 17.9 percent to close $4.14. Freeport McMoran (NYSE: FCX) also fell $1.44 or 6.6 percent to $20.24.

At the time of writing Asian markets are trading lower.

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