Proactive investors

US markets put in a late hour rally and thanks to the new Treasury Secretary

by Proactiveinvestors

It was an extraordinary Friday in New York. After languishing much of the day around yesterday’s close,  Wall Street rallied following President-elect Barack Obama’s plans to appoint New York Federal Reserve President Timothy Geithner as Treasury secretary. Geithner will replace Henry Paulson. The reaction underscores investor frustration and Geithner’s appointment appears to have infused some confidence in markets.

Dow gained sharply 494 points or 6.5 percent to close 8,046, and recovered more than its losses yesterday. Both S&P 500 and NASDAQ also declined 48 points (6.3 percent) and 68 points (5.2 percent) to close at 800 and 1,384 respectively.

A jump in oil and gold prices helped Toronto and TSX gained 431 points to close at 8,155. TSX venture index also added 12.2 points. After few days of weakness the Canadian dollar gained against the US dollar 0.99 cents to close at 78.30 cents.

US stocks also benefited from the Federal Deposit Insurance Corp (FDIC) decision to guarantee up to $1.4 trillion in U.S. banks' debt for more than three years as part of the government's financial rescue plan. The approval is expected to help currently struggling inter-bank lending.

Financials

Financials saw some buying interest towards the end of the day and Goldman Sachs (NYSE: GS) added 2.52 percent or $1.31 to close at $53.31. Morgan Stanley (NYSE: MS), Merrill Lynch (NYSE: MER) and Bank of America (NYSE: BAC) also gained 9.24 percent, 4.8 percent and 1.96 percent to close at $10.05, $8.34 and $11.47 respectively.  JPMorgan Chase (NYSE: JPM) however closed lower $0.66 or 2.82 percent.

It was a roller coaster ride for the embattled Citigroup (NYSE: C). Citigroup fell precipitously when the CEO Vikram Pandit stated that there are no plans to break up the company or sell the Smith Barney brokerage unit According to Bloomberg. The stock was at one stage close to $3.00 but later gained along with other stocks. Citigroup still closed lower at $3.77 marking another 20 percent decline during the day.

It was a day of mixed fortunes for Canadian banks. The Bank of Nova Scotia (TSX: BNS) and Royal Bank (TSX: RY) gained 2.32 percent and 2.33 percent to close at $31.25 and 36.48. Bank of Montreal (TSX: BMO) declined $0.93 to $32.41. TD Bank (TSX: TD) continued to slide as on the back of yesterday disappointment and closed $2.27 or 5.21 percent lower at $41.30. CIBC (TSX: CM) also fell 1.5 percent and closed $41.65.

US Insurers recovered from yesterday’s chocks. Prudential Financial (NYSE: PRU) and Lincoln National Corp (NYSE: LNC) bounced back and closed 19 percent and 25 percent higher at $16.30 and $6.36 respectively. Hertford Financial Services Group (NYSE: HIG) however failed to ignite optimism in the market and fell a further 11 percent to settle at $4.95.

Energy

Markets were buoyed by a jump in oil prices as light sweet crude gained 51 cents to reach $49.93 a barrel on the New York Mercantile Exchange. Nothing to get too excited however, as oil remains 13 percent lower from last week.

Stocks attracted considerable buying interest following the price increase. EnCana Corp. (TSX: ECA) gained 11 percent to $48.66 while Suncor Energy Inc. (TSX: SU) added $1.79 or 9.51 percent to $20.62. Petro-Canada (TSX: PCA) and Canadian Natural Resources (TSX: CNQ) also gained $1.66 and $6.18 or 17 percent to close $22.49 and $41.61 respectively. Having fallen steeply much of the week, Oilexco (TSX: OIL) recovered and closed 22 percent high at $1.77.

Oil stocks were rallying in the US as well. Exxon Mobil Corp. (NYSE: XOM) gained $7.30 to close at $75.81 while Chevron Corp. (NYSE: CVX) added $6.09 to reach $70.49. ConocoPhillips (NYSE: COP) and Marathon Oil (NYSE: MRO) gained $5.04 (12 percent) and $2.94 (15 percent) to close at $46.84 and $22.52 respectively. BP plc (NYSE: BP) also jumped $3.78 to close at $43.34. Devon Energy (NYSE: DVN) the unconventional gas player rallied $9.46 to reach $68.96.

Metals

The metal sector received a massive boost as the gold bullion gained $57.00 to close US$800.00 an ounce on the New York Mercantile Exchange. The TSX gold sector soared 27.2 percent. Goldcorp Inc. (TSX: G) rose $6.27 to $31.04 while Barrick Gold Corp. (TSX: ABX) added $8.70 or 32.5 percent to reach $35.50. Kinross Gold (TSX: K) added $3.93 to $17.90. In the US, Newmont Mining (NYSE: NEM) gained $5.79 or 25 per cent to close at $28.79. AngloGold Ashanti (NYSE: AU) also rallied 43.1 percent. Goldfields (NYSE: GFI) followed suit to record 37 percent gain to close at $7.30.

Along with other metal stocks Teck Cominco Ltd. (NYSE: TCK) also soared to claw back 12.9 percent to close $3.58. The other major mining news in Toronto was the merge between HudBay Minerals Inc. (TSX: HBM) and Lundin Mining Corp. (TSX: LUN) in an all-stock deal worth $814 million, based on current market prices. HudBay fell 25 percent to close $0.075 while Lundin gained 4 percent to reach $1.05.

Among other companies/sectors, better than expected 3Q profits helped Gap Inc (NYSE: GPS) gain 27 percent to close at $12.10. Other retailers such as American Eagle Outfitters (NYSE: AEO) and J. C. Penny (NYSE: JCP) also gained 5.8 percent and 5.3 percent respectively. Wal-Mart Stores (NYSE: WMT) continued to gain and added 4.5 percent to close $52.92.

It is heartening to see some buying interest to close the week. Much of the optimism comes from Mr. Geithner’s appointment. It is worth mentioning though Mr. Geithner is not a miracle worker!

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