Falling financials help send North American stock markets lower
Malcolm Morrison, The Canadian Press
August 19, 2008 - 4:46 p.m.
TORONTO - A sharp selloff in bank stocks sent the Toronto stock market lower Tuesday, but TSX losses were limited by solid gains in energy and mining stocks.
Financials also led the way to a sharply lower session in New York following a glum report on investment bank Lehman Brothers.
Toronto's S&P/TSX composite index dropped 55.52 points to 13,063.85.
The TSX Venture Exchange was down 21.91 points to 1,901.73 while the Canadian dollar advanced 0.29 cent to 94.25 cents US as Statistics Canada reported that higher demand for automotive products helped send wholesale sales up two per cent to $45.2 billion in June, their fifth increase in six months.
New York's Dow Jones industrials fell 130.84 points to 11,348.84.
The Nasdaq composite index moved down 32.62 points to 2,384.36 and the S&P 500 index lost 11.91 points to 1,266.69.
There were more jitters about the financial sector after an analyst at JPMorgan Chase cut his earnings estimates for Lehman Brothers because of a seasonal slowdown in business and continued weakness in the credit markets. Lehman shares closed down $1.99 or 13.25 per cent to US$13.04.
Financials were also under pressure after former International Monetary Fund chief economist Kenneth Rogoff said that "the financial crisis is at the halfway point, perhaps."
He added that he expects "one of the big investment banks or big banks" to go under.
The TSX financial sector was down three per cent as TD Bank (TSX:TD) declined $2.90 to $59 while Royal Bank (TSX:RY) lost $1.57 to $45.04.
"Canadian financials have to be treated quite differently, we're nowhere near the pain of writeoffs that have been endured by U.S. and European financials," said Vincent Delisle, portfolio strategist at Scotia Capital in Montreal.
"The real story of this summer is the U.S. dollar rally and commodity prices going down (which) has triggered some rotation out of resource stocks and into financials. So we've gone from a very dramatic oversold condition for banks to pretty much overbought conditions a few days ago."
