By James Langton
(June 29 – 13:00 ET) – Markets are feeling the chilling effect of globalization today. Negative talk about the growth potential in the wireless business by Ericsson is hitting stocks such as Cisco, Lucent and our own Nortel Networks. The battering of Nortel is slugging the whole TSE.
At midday the TSE 300 is down 133 points to 10,098. Volume is desperately thin, however, at just 52 million shares traded. Traders are perhaps preoccupied with the reading the allegations against their comrades from 12 big brokerage firms and RT Capital, its employees and executives, levelled by the TSE and OSC this morning in the stock manipulation scandal.
Whatever’s causing the gloomy mood stocks are taking it on the chin, with volume 3:1 on the downside and decliners outrunning advancers almost 2:1.
Just about every group on the TSE is down except for media stocks and consumer products, which is getting a boost from the biotechs. The biotechs are up thanks to Eli Lilly & Co. Its stock jumped 25% on news that its trials of a drug to fight sepsis, an often fatal blood infection, is having strong results. Analysts are speculating that this could be a US$1 billion drug for Lily if it is successful.
Every other sector is down, led by technology, down 2.4%, with Nortel itself down about the same. Gold, paper, pipelines, utilities are all taking shots.
Joining Nortel on the downside is Alcatel Networks, JDS Uniphase, Celestica, Research in Motion, 724 Solutions ad Certicom. ATI Technologies is taking a special hit of its own after it announced a greater than expected third-quarter loss. It reported a net loss of 10¢ a share, larger than the 6¢ to 7¢ loss it forecast on May 24.
Golds are giving up yesterday’s gains as skepticism returns on U.S. rates.
The only other area of any strength is oil service stocks. Names such as Precision Drilling and Dreco Energy Services are up.
This morning TransCanada PipeLines Ltd announced it is buying the 29.9% of the Ocean State Power plant it doesn’t already own. The US$61 million deal includes the assumption of debt.
Noranda Inc. is refusing to comment on rumours that it is set to sell its brokerage operation, Rudolf Wolff Ltd., to the London Metal Exchange trader MG Plc Ltd.
In the U.S. trading is about average and the tone is negative there, too. The Dow Jones industrial average is down 124 points at midday to 10,404. NASDDAQ has dropped 77 points to 3,863. The S&P 500 is off 15 points to 1,439.
Apart from Ericsson taking down the tech and telecom sectors, a profit warning from Unisys Corp. is weighing on those sectors, too. Eli Lilly, as noted, is boosting the drug group.
The small caps make the slide unanimous. The CDNX is off 16 points to 3,441 on average volume of 19.1 million shares. Techs are leading the sell, while mines are flat and oils are strong. Flukong Enterprise Inc. is the leading trader, up 100% to 20¢ on volume of 2.65 million shares.