Toronto's key stock index finished higher on Friday after a seesaw session in which the financial sector was pressured by heightened concern about the health of the US banking sector. The heavyweight financial sector started the session with a quick rally, bolstered by the news that Bank of America will receive a bailout from the US government.
But the early gain fizzled and became the main drag on the index, which otherwise advanced in key sectors such as materials and energy. The financial group finished down 1.45 percent as the market judged the rescue plan was not enough to overcome signs of more fallout from the credit crisis for the financial sector.
"There are still problems out there in terms of financial system so it will reflect upon financial service companies regardless of jurisdiction," said Ian Nakamoto, director of research at MacDougall, MacDougall & MacTier. Four financial services companies were the top index movers to the downside. Among the key stocks that limited the market's climb were Bank of Nova Scotia, down 2.9 percent at C$30.45, and Toronto-Dominion Bank, down 0.8 percent at C$43.70.
Also weighing on the banking sector was news that Royal Bank of Canada, TD Bank and Laurentian Bank of Canada were all downgraded by Dundee Securities. Still, seven of the index's 10 main groups finished higher, banding together to push the index to finish the week on a bright note.
The Toronto Stock Exchange's S&P/TSX composite index closed up 0.46 percent, or 40.79 points, at 8,920.40. Earlier in the day, it rallied as high as 9,036.44, for a gain of 156 points, or 1.8 percent. The blue chip S&P/TSX 60 index closed up 0.33 percent at 538.48.
The energy and materials groups, which together account for about 40 percent of the overall index, were volatile components as they tracked the choppy price movements of crude oil and other commodities. Both sectors managed to overcome the drag from the TSX's financial group slide. The materials group was up 3.6 percent and energy was up 0.8 percent.
Key issues helping to keep the TSX afloat were gold stocks, which advanced strongly for a second consecutive session on firmer gold prices. Kinross Gold, the most influential advancer, gained 7.42 percent to C$22.45. Goldcorp rose 4.44 percent to C$32.90.
Toronto's key index charged out of the gate in 2009 with a string of solid gains that had it up 5.76 percent at one point last week. But a bout of selling this week, followed by a rebound, has left the index down about 0.7 percent for the year.
Portfolio manager John Kinsey said a positive session on Friday might indicate that the market had had "quite a good shakeout" earlier this week and could now be set up for the possibility of revisiting the highs from the month. "And if we can keep oil and gold up, that's going to be a big help and will be a step in the right direction," said Kinsey, a portfolio manager at Caldwell Securities Ltd.
Next week's inauguration of a new US President and the Bank of Canada's interest rate announcement will be closely watched. The Canadian government's federal budget the week after will also be monitored for stimulus measures to lift the economy from recession.
But their impact may be as short-lived as the market responses which followed big stimulus announcements recently. "They are keynote events but it doesn't mean it's going to change market sentiment. Central bankers have thrown everything they've had at the problem. Now it's the governments' turn," said Nakamoto.