North American Markets end lower, Madoff scandal raises concerns over financials
Anxiety over further financial sector losses following the failure of New York investment manager Bernard Madoff sent North American markets down. Potential bankruptcy of auto companies haunted markets as the rescue package for automakers failed to pass the Senate approval. Attempts, initiated by President George W. Bush himself, are currently underway to provide some government help for the auto makers. Dow fell 65 points to close 8,565 while S&P 500 and NASDAQ also lost 11 points and 32 points to close at 869 and 1,508 respectively. A weakness in oil prices sent Toronto down and the TSX lost 53.6 points to 8,564.5. The TSX Venture Exchange also declined marginally 1.7 points to 716.8. The Canadian dollar however strengthened 1.27 cents to 81.19 cents US.
The banking sector continues to be a victim of mishaps. Having failed precipitously due to sub prime mortgages, credit crunch, bankruptcies and rising foreclosures, the US banking sector received another jolt, this time due to an alleged fraud by the respected Wall Street money manager Bernard Madoff. It is alleged that Madoff staged a $50 billion scheme to defraud investors. Victims include HSBC Holdings PLC of Britain, Royal Bank of Scotland Group PLC and Man Group PLC, Spain's Grupo Santander SA, France's BNP Paribas and Japan's Nomura Holdings. In addition several charities as well as personal fortunes of well-known personalities are alleged to have fallen victim to the alleged fraud.
Not surprisingly, banking stocks fell in the US. US Bancorp (NYSE: USB) fell $1.91 or 7.39 percent to $23.93. Bank of America (NYSE: BAC) and JPMorgan Chase (NYSE: JPM) also fell 5.49 percent and 7.47 percent respectively to $14.11 and $28.63 respectively. Wells Fargo (NYSE: WFC) also fell $0.65, to settle at $26.07. Morgan Stanley (NYSE: MS) and Citigroup (NYSE: C) also fell 1.52 percent and 3.9 percent respectively to reach $13.64 and $7.40.
Potential exposure to Madoff scheme sent Canadian banks down as well. Much of the exposure however is for individuals rather than to bank themselves. TD Bank fell 2.9 percent to close at $40.45 while Bank of Nova Scotia (TSX: BNS) remained virtually flat at $31.00. Bank of Montreal (TSX: BMO) also fell $1.01 to $32.57. Royal Bank (TSX: RY) also recorded a $0.55 or 1.6 percent to reach $34.25 while CIBC (TSX: CM) also edged down $0.20 to $48.11.
Early gains by energy companies lost ground towards the end of the day as oil fell $1.77 to $44.51 a barrel on the New York Mercantile Exchange. EnCana Corp. (TSX: ECA) remained virtually flat at $54.95 while Suncor Energy Inc. (TSX: SU) fell just $0.14 to $25.21. Petro-Canada (TSX: PCA) also fell $0.92 to close $27.63. Canadian Natural Resources (TSX: CNQ) meanwhile gained $0.64 to close at $46.60. Oilexco (TSX: OIL) fell 7.18 percent to close at $1.94.
In the US Exxon Mobil Corp. (NYSE: XOM) edged down $0.50to close at $79.95 while Chevron Corp. (NYSE: CVX) fell $0.79 to reach $78.21. ConocoPhillips (NYSE: COP) posted a small gain of 0.99 percent while Marathon Oil (NYSE: MRO) fell $0.21 to $24.71. BP plc (NYSE: BP) also inched up $0.71 to close at $47.75. The unconventional energy player Devon Energy (NYSE: DVN) also fell $0.75 or 1.10 percent to $67.30.
Gold stocks saw some strength as the gold bullion gained sharply $16 to US$836.50 an ounce on the New York Mercantile Exchange. Goldcorp Inc. (TSX: G) soared $1.59 or 4.57 percent to $36.38 while Barrick Gold Corp. (TSX: ABX) added $1.73 or 4.45 percent to reach $40.64. Kinross Gold (TSX: K) also added 1.27 percent to settle at $20.75. In the US, Newmont Mining (NYSE: NEM) added 5.2 percent to close at $37.70. Meanwhile AngloGold Ashanti (NYSE: AU) fell 3.02 percent to settle at $26.29. Goldfields (NYSE: GFI) gained 4.78 percent to close at $9.64.
Following its announcement to close down the Pend Oreille zinc mine, Teck Cominco Ltd (TSX: TCK) rallied $0.20 or 4 percent to $5.65. Freeport McMoran (NYSE: FCX) also gained 1.03 percent to $22.51.