January 16, 2009 / 4:48 PM / 9 years ago

CANADA STOCKS-TSX turns lower as banks swallow early gain

3 Min Read

* TSX unravels after 1.8 percent surge at open

* Higher commodity prices help to cushion slide

* Boost from Bank of America aid fades quickly (Adds details)

By Frank Pingue

TORONTO, Jan 16 (Reuters) - Toronto's main stock index was knocked lower late on Friday morning as a slide in the heavyweight financial sector more than offset a rally in the energy and materials groups.

Financial shares , which rose 2 percent early in the session on news that Bank of America (BAC.N) will get aid from the U.S. government, were down 2 percent late in the morning as the market judged the bailout was not enough to overshadow signs of more fallout from the credit crisis for the financial sector.

Higher prices for gold and oil helped to power gains in the energy and materials sectors, which together account for about 40 percent of the overall index and managed to cushion the TSX's slide. The materials group was up 1.9 percent and the energy was up 0.67 percent.

Among the key stocks behind the market's fall were Bank of Nova Scotia (BNS.TO), down 4.5 percent at C$29.94, and Toronto-Dominion Bank (TD.TO), down 3.5 percent at C$42.53.

Also weighing on the banking sector was news that Royal Bank of Canada (RY.TO), TD Bank and Laurentian Bank of Canada (LB.TO) were all downgraded by Dundee Securities.

At 11:30 a.m. (1630 GMT), the Toronto Stock Exchange's S&P/TSX composite index .GSPTSE was down 29.89 points, or 0.34 percent, at 8,849.72. Earlier, it rallied as high as 9,036.44, for a gain of 156 points, or 1.8 percent.

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 has left it down 1.5 percent for the year.

Key issues helping to keep the TSX from falling further were oil company Canadian Natural Resources (CNQ.TO), whose shares were up 3.3 percent at C$49.16, and miner Goldcorp (G.TO), which rose 2.9 percent to C$32.45.

The latest slide in the key Toronto index follows a 2.2 percent rally in Thursday's session, and a 3 percent skid on Wednesday.

"If we can stay up today it might just mean that we had quite a good shakeout on Wednesday and that we are back in an uptrend and we could go back to the January highs," said John Kinsey, portfolio manager at Caldwell Securities Ltd.

"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."

$1=$1.24 Canadian Reporting by Frank Pingue; editing by Peter Galloway

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