Friday, November 21, 2008 3:33 PM
The close: Late flurry is on the up side
David Parkinson
As usual, North American stock markets saved their excitement for the final hour of trading. But this time, it was a refreshing dose of positive excitement.
After a day thin on hard news, traders jumped all over reports from NBC News and the Wall Street Journal that U.S. president-elect Barack Obama will name New York Federal Reserve Board president Timothy Geithner as his Treasury Secretary. The news, which hit financial wires a little after 3:00 p.m. ET, unleashed pent-up demand in stocks after another rough week of selling.
The Dow Jones industrial average closed up 494.13 points, or 6.5 per cent, at 8,046.42, moving back above the psychologically important 8,000 barrier, while the S&P 500 gained 47.59 points, or 6.3 per cent, to 800.03, breaching its key 800-point level. Canadian stocks came along for the ride, lifting the S&P/TSX composite index by 430.63 points, or 5.6 per cent, to 8,155.39 by the closing bell.
"That was the news that seemed to get the bounce going," said strategist Bill Ryder at advisory firm Riverfront Investment Group in Richmond, Va. "The market is so oversold in so many ways, it was due for a bounce. It was ready for some good news."
Mr. Geithner, 47, has already been working closely with current Treasury Secretary Henry Paulson on the credit-market bailout, serving as a key go-between with the Wall Street banks and Washington. That should put him in good position to hit the ground running on efforts to restore stability in the financial community.
"This is an excellent choice. He knows where all the bones are buried on Wall Street," Tom Sowanick, chief investment officer at Clearbrook Financial LLC in Princeton, N.J., told Reuters.
"He doesn't have a doctorate. And he's not from Goldman Sachs," Mr. Ryder quipped, a veilled reference to some recent top administrators who may have misguided the U.S. economy.
In Toronto, materials stocks led the rebound, rising an astounding 18 per cent, recovering Thursday's losses and then some. The surge was fuelled by improved commodity prices and big gains in gold, as investors continued to shift into the safe haven of bullion. Gold in New York jumped $45.80 (U.S.) to $794.50 an ounce, its highest level in more than a month. Leading the charge was Barrick Gold, the country's biggest gold producer, which rocketed up a stunning 29 per cent.
Energy stocks also had a strong day, up 8.4 per cent, as oil prices dug in their heels around $50 a barrel. And financial stocks, under pressure for much of the day, recovered to close up slightly. Over all, eight of 10 TSX subindexes closed higher.
Whether Friday's gains will be sustained come next week could depend largely on what news might break over the weekend. Rumours continue to circulate around U.S. banking giant Citigroup, which is contemplating asset sales as it tries to stave off the growing threat of bankruptcy. Meanwhile, U.S. auto makers are clinging to hopes of a government bailout to rescue them from a similar fate. Developments on either front could come before trading resumes Monday, as this financial crisis has repeatedly demonstrated that businesses and policy makers don't stop working on the weekends.
Citigroup was a leading decliner among U.S. stocks Friday, plunging 20 per cent to $3.77, as the company's uncertain fate continued to drive the stock's precipitous fall.
