Canadian equities lost a little ground this last week while U.S. stocks put together five straight winning days, representing its best performance and longest string of daily winners since the last week of June. Wall Street's rise in optimism was fueled by news that Greece may get another round of financial assistance for its debt-stricken banks as the financially-floundering country was the topic of an informal gathering in Poland of financial ministers from around the world, including U.S. Treasury Secretary Timothy Geithner. With Greece set to default on loans in the next few weeks, intervention to bail-out the country is taking a top priority to avoid any threat of a euro fallout. Five of the world's top central banks unified on Thursday and announced that they would provide three-month dollar loans to banks through the end of 2011. Canadian stocks had a three-day winning streak running during the middle of the week, but poor retail sales data, lowered energy and mineral prices and a dismal financial report by Research in Motion took its toll on Friday as all sectors closed in the red with most of Wednesday and Thursday's gains wiped out as stocks broadly fell.
The European Central Bank, as well as French and German leaders, added to the hope for financial stability in the Eurozone with mid-week comments regarding a coordinated effort (including actions from the U.S. Federal Reserve) to ease dollar-funding access to banks. The joint effort has October 11, 2011 targeted as a date to have definitive measures intact to conclude banking concerns in Greece, Italy and Spain. In what could only serve as a reminder of the comments from Standard & Poors upon the downgrade of the U.S. credit rating, Timothy Geithner cited a portion of the problem stemming from ongoing conflict between countries and the central bank creating division and fear in Europe.
Research in Motion opened the floodgates to an already damaged market sentiment when it reported that gross margins fell to 39% in the quarter ended Aug. 27, a 5 percent drop as compared to the year prior quarter, and projected a continued decline for the current period. Shares of RIMM fell nearly 20 percent on the week to close at $23.93. Shares of the blackberry maker have fallen roughly 65 percent in the last six months.
Netflix was again in focus as the stock price took a pounding on lowered forecasts for U.S. subscribers. Shares fell a whopping 23.92 percent on the week from $203.97 to end the week at $155.19.
In positive financial news, Ebay saw shares soar upward by 18.38 percent this past week as the online retailer received an upgrade based on continued growth of its PayPal division.
Calgary-based oil producer Petrominerales Ltd. slipped a bit lower on the week, but did get good news as production of over 30,000 barrels per day was resumed mid-week in Columbia, South America. Protestors had shut-in production at its Corcel and Guatiquia fields as announced on September 12th. The company expects to be back in full production at those fields by the start the new week.
Next week will include the Tuesday/Wednesday meeting of the Federal Open Market Committee (FOMC) which could possibly include more talk of quantitative easing or some other form of assistance from the U.S. Federal Reserve to help the economy. Keep an eye out for mumblings from the meeting in the later part of the week as it certainly could have an impact on market direction.
Gold closed up on Friday, but slipped lower for the week after only briefly breaking above the prior week's close on Monday. European concerns of weakening global economies slacked a bit this last week and that fact combined with gold's technical chart reaching exaggerated level gave gold a breather. On the week, gold's December contracts, the most actively traded contract on the Comex, fell by $44.80 to 1,814.70, a change of 2.41 percent. December Silver performed similarly, sliding $0.793, or 1.91 percent, to end the week at $40.831. Copper closed lower four out of five days; giving up $0.071, or 1.77 percent, to $3.9315.
The Canadian dollar received an influx of strength this week as concerns of European and U.S. economic stability sent currency traders once again looking to the loonie as a bit of a safe haven, regardless of optimism for Greece helping equities. In what was an exchange rate approaching parity, the CDN pulled away from the USD this last week; widening the gap by 1.87%. Next week with begin with CDN$1.00 buying USD$1.02192.
Crude oil found strength to begin the week, but gave a little back in see-saw movements during the final three days of the week with October crude (WTI) closing ahead $0.72 on the week, or 0.83%, at $87.96. As the equity markets continue to fluctuate, expect crude to continue to remain a bit volatile.
General Motors and the United Auto Workers have apparently reached terms on a proposed contract for the first time since the U.S. government bailout and bankruptcy filing by GM. While terms were withheld until they can be reviewed, the new deal is reported to recall hundreds of workers, re-open a Tennessee factory and pay one-time bonuses to current workers as well as create new jobs and offer profit-sharing bonuses to employees.
In other union news, Air Canada and the Canadian Union of Public Employees have until 12:01AM Thursday morning to come to terms or a work stoppage could be coming as the union representing 6,800 flight attendants at Air Canada served strike notice on Friday. The two organizations are stuck trying to overcome major obstacles regarding wages, working conditions and the preservation of pensions.
The S&P TSX Composite Index slipped lower for the second straight week, falling 113.78 points, or 0.92%, on the week to 12,273.76. The TSX Venture Exchange fell for the fourth time in five weeks, subtracting 22.25 points, or 1.25%, to finish at 1,762.85.
In the States, the Dow Jones Industrial Average moved firmly upward, gaining 516.96 points, or 4.70%, on the week to 11,509.09. The much-broader S&P 500 popped as well, adding 61.78 points, or 5.35%, on the week to close at 1,216.01. The tech-rich NASDAQ Composite outpaced all by rising by 6.25%, or 154.32 points, to 2,622.31.
On Wednesday, the U.S. Bureau of Labor Statistics reported that following a 0.2 percent advance in July, the Producer Price Index for finished goods (which measures the average change over time in selling prices) remained unchanged in August. The index came in line with expectations. Stifled by declines in auto sales (down 0.3 percent) and clothing store sales (down 0.7 percent), retail sales in the U.S. remained flat. Gasoline sales rose.
On Thursday, the number of new motor vehicles sold in Canada fell 6.2% in July to 132,386 units, partially offsetting the gains in June. Truck and passenger car sales both declined. Lower sales in Ontario accounted for half of the national decrease. Stats Can also reported that manufacturing sales rose 2.7% to $46.7 billion in July, snapping a chain of three consecutive months of declines. More than three-quarters of the sales gains in July were in Ontario. Stateside, the Consumer Price Index rose 0.4% in August from July, topping estimates of 0.2 percent. Price gains were widespread and led by increases in gasoline and food indices. U.S. industrial production rose 0.2% in August following a 0.9% gain in July and representing the fourth straight month of increases in production. The Philadelphia Fed Manufacturing Survey was -17.5 in September, the third negative reading in four months. August had recorded a disastrous reading of -30.7. A reading below zero represents contraction in regional manufacturing growth.
On Friday, Non-Canadian resident investors resumed the pattern of significant acquisitions of Canadian securities in July as they added $11.8 billion to their holdings, mainly in the form of federal Treasury bills. Canadian holdings of foreign securities edged up $1.3 billion, led by further acquisitions of foreign corporate shares. The US Reuters/Michigan Consumer Sentiment Index increased moderately in August to 55.7 points, from 54.9 points in July. While not a stellar increase, any signs of increasing positive sentiment is generally embraced by investors.
Next week, Canadian economic data will include July's Wholesale Trade and August's Leading Indicators on Tuesday; Consumer Price Index updates on Wednesday; and Employment Insurance, Retail Trade stats on Thursday.
In the States, data will be received on Housing Starts on Tuesday; Existing Home Sales on Wednesday and Leading Indicators on Thursday.
Among the stocks we watched this week, oil and gas company Compass Petroleum Ltd. (TSX-Venture:CPO) made a strong move mid-week, but gave it back by Friday's close to end the week even after hitting an intraweek high of $1.55. The other stock we had on radar, gold explorer African Gold Group (TSX-Venture:AGG) touched its intraweek high of $0.57 early in the week but slid south to close the week down $0.03, or 5.26%, at $0.54.
In the States, mineral explorer Tumi Resources Ltd. (Pink Sheets:TUMIF) had some choppy trading during the week, but picked-up the pace on Friday to close at its high of the week at $0.148, up $0.007, or 4.96%. The other U.S. stock on our watchlist, software platform provider Vringo Inc. (AMEX:VRNG) rose to touch $1.44 on Tuesday, but Friday's trading saw the stock close the week down mildly, losing 2 cents, or 1.48%, to finish at $1.33.
If you'd invested in all four stocks and held them to the end, you'd have seen a tepid average loss of 0.45%. However, if you'd bought all four at the beginning of the week and sold each at its peak, you would have realized gains of 4.63%.
Next week, we focus on Crocodile Gold Corp. (TSX:CRK) and Tirex Resources Ltd. (TSX-Venture:TXX) and In the States, look for big things from Argentex Mining Corp. (OTCBB:AGXMF) and Idle Media Inc. (Pink Sheets:IDLM).
Next week should prove interesting for the North American markets. The Canadian indices walked to a different beat than that of U.S. markets this last week, a path that often doesn't seem to repeat frequently week over week, but with gold having a good day on Friday Canadian equities may see the worm turn this week. The U.S. markets seemed to ride on the wings of speculation that Greek banking concerns may get put to rest, but this may be subdued this week and the technical chart for the Dow is back up near two significant resistance levels at 11,500 and 11,700. If EU emphasis chills some this week and gold sees resurgence to break its short-term downtrend, this coming week could see the North American markets moving in opposite directions again. Of course, only time will tell, but it's all food for thought.
Our latest U.S. spotlight, All American Gold Corp. (OTCBB:AAGC) released two press releases this past week showcasing corporate advancements in its Nevada gold properties. On Monday, AAGC announced the commencement of a drilling program for its Goldfield West project in Nevada, a project located just 4 miles southwest of International Mineral's (TSX:IMZ) Gemfield deposit and 4.5 miles west of the Goldfield district, which is renowned for its historic production in excess of 4 million ounces of gold at an average grade of > 17 g/t gold. Historic drilling on the project has included nearly 140 drill holes showing strong results with this latest project set to consist of a total of 1,550 to 2,000 meters of reverse circulation drilling for six drill sites located in both the northern and southern parts of the property.
Additionally, the Company disclosed on Thursday that it has completed the signing of an option agreement to secure an initial 15% interest in the Iowa Canyon Property in Lander County, Nevada. An additional option is also available to All American Gold to acquire another 25% interest, for a total of 40% in the burgeoning area of exploration of Nevada. While the stock clearly broke the support levels we mentioned during our Company spotlight, which hopefully many investors also saw as a warning sign, it still hasn't changed the fundamentals for the Company. Trading has been choppy and fast moving for the Company, so proper due diligence and stop losses are always strongly encouraged before making any dive into either this Company or any other micro-cap stock.
This coming week we will be spotlighting an exciting technology play that has made great in-roads in just a short time frame with their technology. The stock is in an explosive industry, it was just given a strong price target by a leading research Company and is relatively under the radar among investors. Look for more information on this Company coming to your email boxes this upcoming week.
