Stocks close lower, C$ down

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The financials sector led the way to a tumble on the Toronto stock market Tuesday amid a major disappointment in American consumer confidence.

The S&P/TSX composite index closed down 101.86 points to 10,374.91 as the Toronto market wrapped up second-quarter trading with a substantial gain. The TSX is closed Wednesday for the Canada Day holiday.

TSX losses were led by a 2% drop in the financial sector amid an announcement from credit rating agency DBRS that it was downgrading the preferred shares of the big six Canadian banks.

DBRS said the downgrade relates to "the elevated risk of non-payment of preferred dividends relative to the risk of default indicated by senior debt ratings."

It added that the downgrades do not reflect any specific credit event.

Royal Bank gave back $1.12 to $47.57 and Bank of Montreal declined 96 cents to $49.02. The financial sector gained about 33% during the second quarter.

Declines piled up after the U.S. Conference Board said its Consumer Confidence Index stood at 49.3 for June, down from its revised May level of 54.8. The reading was much worse than the 55 reading economists had expected.

"That’s not a good sign," said Fred Ketchen, manager of equity trading at Scotia Capital.

"And here we suffered our ninth consecutive month of economic contraction in April. And May may not be any better — so why would we get all excited?"

Investors also took in news that the Canadian economy was still shrinking during April — but at a slower pace than the previous month.

Statistics Canada said real gross domestic product fell in April by 0.1%. GDP shrank by 0.3% in March.

"The mild drop in April GDP reinforces the point that the worst of the declines for the economy are behind, but we have yet to reach the turning point," said Doug Porter, deputy chief economist at BMO Capital Markets.

"We look for another drop in May output, and possibly for June as well before the economy begins to grind out some modest growth in July."

Tuesday’s drop on the final day of the second quarter on the TSX was preceded by a five-session string of advances. The TSX jumped 19% overall in the April-June period.

The Dow Jones industrial average was ahead 11% and the S&P 500 15% for the quarter.

Analysts say the quarter saw a continuation of the big change in sentiment that took root in early March. Investors stopped pricing in a depression-like scenario and instead concentrated on so-called green shoots — data that indicated economies were close to getting out of recession and possibly into a recovery by the end of the year.

But they also say investors are no longer content to settle for news that is merely "less bad" and are nervous that the economy’s rebound won’t be as robust as envisaged. This fear has recently put a dent in the market’s advance that started March 10 and at one point had sent indexes in Toronto and New York up around 35%.

"What does bring them down in expectations is a kind of performance that we’re putting on so far here today," said Ketchen. "I still think we’ve got some gains ahead of us but it’s too early."

The Canadian dollar dropped 0.47 of a cent to 85.98 cents US. The TSX Venture Exchange slid 13.59 points to 1,091.57.

New York markets were also firmly in the red following the consumer data. The Dow Jones industrial average stepped back 82.38 points to 8,447. The Nasdaq composite index lost 9.02 points to 1,835.04 while the S&P 500 declined 7.91 points to 919.32.

The consumer confidence index has two parts. The Present Situation Index, which measures how shoppers feel now about the economy, declined to 24.8 from 29.7. The Expectations Index, shoppers’ outlook for the next six months, declined to 65.5 from 71.5 in May.

There was also some positive news from the U.S. housing sector indicating that home price declines are moderating.

The Standard&Poor’s/Case-Shiller index showed home prices in 20 major cities tumbled by 18.1% from April 2008.

April, however, marked the third straight month both indexes didn’t set record price declines. And yearly losses in 13 metros improved compared with March.

Investors will also take in a key report on the manufacturing sector Wednesday, while Thursday brings the much anticipated monthly jobs report.

U.S. markets are closed Friday in observance of the Independence Day holiday.

The TSX energy sector was flat Tuesday as the August crude contract on the New York Mercantile Exchange lost $1.60 to US$69.89 a barrel. But hopes for higher demand have driven the price of oil up 40% in the second quarter while the energy sector has moved up more than 20%.

The TSX base metals sector, up 70% for the quarter, slipped 0.65% on Tuesday. Equinox Minerals fell 15 cents to $2.69 while Ivanhoe Mines advanced nine cents to $6.45.

Teck Resources, one of the best performing stock on the TSX during the quarter, was off three cents to $18.55. Teck stock has surged 163% since March 31.

The August bullion contract in New York was down $13.30 to US$927.40 an ounce, sending the gold sector down 2.75%. Barrick Gold Corp. faded $1.21 to $39.15.

Elsewhere on the TSX, Shares in Canadian autoparts giant Magna International rose $3.20 to $49.35 after the company’s co-CEO, Siegfried Wolf, said Tuesday he is confident a deal to take over GM unit Adam Opel GmbH will be complete by the middle of July.

(THE CANADIAN PRESS)

North American markets

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	Close	Change	YTD
Dow Jones	8,447.00	-82.38 or -0.97%	-3.75%
S&P 500	919.32	-7.91 or -0.85%	+1.78%
NASDAQ	1,835.04	-9.02 or -0.49%	+16.36%
TSX Composite	10,374.91	-101.86 or -0.97%	+15.43%

International markets

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	Close	Change	YTD
Nikkei	9,958.44	+174.97 or +1.79%	+12.40%
Hang Seng	18,378.73	-149.78 or -0.81%	+27.74%
SENSEX	14,493.84	-291.90 or -1.97%	+50.24%
FTSE 100	4,249.21	-44.82 or -1.04%	-4.17%
CAC 40	3,140.44	-53.24 or -1.67%	-2.41%
DAX	4,808.64	-76.45 or -1.56%	-0.03%

Bonds

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Bonds	$Current	$Previous	%Yield
Cdn. 10-year bond	103.33	103.01	3.35
Cdn. 30-year bond	119.49	118.84	3.85
U.S. 10-year bond	96.75	97.00	3.52
U.S. 30-year bond	98.89	99.09	4.32

Currency

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BoC Close	Today	Previous
Canadian $	0.8598	0.8645
US $	1.1630	1.1567

Euro Spot Rate	Today	Previous
Canadian $	0.6130	0.6140
Euro	1.6312	1.6286

Commodities

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Gold	AM	PM
London Gold Fix ($US)	$941.00	$934.50

Oil	Close	Change
WTI Crude Future (US)	$69.94	-$1.55 or -2.17%

(06/30/09)