The Toronto Stock Exchange's main index fell more than 200 points on Friday as financial issues were hurt by inflation fears and worries over more US mortgage-related problems, while consumer stocks also fell. The S&P/TSX composite index slid 209.48 points, or 1.42 percent, to close at 14,580.67, as all ten TSX subgroups lost ground.
-- TSX falls more than 200 points as financials weigh
-- Inflation worries hit banks, consumer stocks
-- Oil stocks weaken despite stronger oil price
Inflation worries weighed on both financials and consumer stocks, after Bank of Canada Governor Mark Carney said late on Thursday that rising energy prices could lead to higher inflation. "There's some worry that interest rates may not fall any further, and may even start to rise, which in turn would squeeze the banks' margins," said Gavin Graham, chief investment officer at Guardian Group of Funds.
The heavily weighted financial subgroup fell 2.34 percent, while the consumer discretionary and consumer staples groups fell 2.61 percent and 2.46 percent, respectively. Also hurting bank shares were rumours that US commercial bank Merrill Lynch may issue a profit warning and take additional writedowns on its mortgage holdings.
Canadian Imperial Bank of Commerce fell C$1.87, or 2.9 percent, to C$61.63, while insurer Manulife Financial dropped C$1.12, or 2.9 percent, to C$37.13. The overall decline marked the second-straight day of heavy losses for Canada' main stock index, which hit an all-time intraday high of 15,154.77 on June 6.
Energy issues have been the key reason behind the Canadian market's gains of late, but they weakened on Friday despite oil prices that recovered much of the previous day's retreat. Crude rose by about $2.70 a barrel after a $5 loss in the previous session after China said it would raise domestic fuel prices, a move seen as reducing demand.
"The oil stocks are still not playing catch-up to the commodity today," said Lex Kerkovius, senior research analyst at McLean & Partners Wealth Management Ltd in Calgary. Husky Energy fell C$1.99, or 4 percent, to C$47.61, while Tesco Corp retreated C$1.54, or 4.7 percent, to C$31.10.
As a group, energy stocks fell 1.2 percent. Among top gainers, shares of tech company Wi-Lan Inc shot up 10.9 percent, or 19 Canadian cents, to C$1.94 after it said it launched a new round of patent infringement lawsuits targeting Motorola, Research In Motion, and UTStarcom Inc.
Research in Motion, the largest stock on the index, fell C$1.90, or 1.3 percent, to C$148.00. On Wall Street, stocks sagged on concerns about more bank writedowns and higher oil prices. The Dow Jones industrial average dropped 220.40 points, or 1.83 percent, to close at 11,842.69. The Nasdaq declined 55.97 points, or 2.27 percent, to 2,406.09. In Toronto, the blue chip S&P/TSX 60 index slid 12.03 points, or 1.36 percent, to 870.55. For next week, Graham said he wouldn't be surprised to see more declines in energy and materials issues.
However, shares of BCE Inc should rise on Monday after the telecom company won backing from the Supreme Court to proceed with its leveraged buyout, worth C$34.8 billion. BCE shares, which closed at C$34.60 on Friday before the decision was announced, should jump closer to the C$42.75 being offered by buyout group. The telecom company's US-listed shares were up 8.8 percent in after-hours trading.
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