By James Langton
(March 15 – 17:00 ET) – In with the old, out with new. That’s the way stocks traded today. Techs were brutualized. Cyclicals were revived. They rallied on the rotation. When the dust settled, the TSE 300 finished down 100 points, or 1%, to 9,294. Volume was characteristically heavy at 241.8 million shares and decidedly negative, about 14:9 in favour of the downside. Market breadth was slightly worse, about 5:3, in favour of decliners.
The same pattern was evident, if not more extreme, on Wall Street. The Dow roared to its fourth biggest point gain ever, closing up 320 points to 10,131. Transports drove the rally. Conversely the Nasdaq shed another 124 points to close at 4,582, down almost 10% from its all-time high. The S&P stuck with the Dow closing up 33 points to 1,392.
In Toronto only five of the TSE’s 14 groups finished down, but they included industrials down 3.3%, utilities off 1.6% and merchandisers off 1.7%. Engineering firms, software and technology hardware were the weakest subsectors in order.
The big loser list reads like a who’s who of hot Canadian tech stocks. 724 Solutions dropped 11%, Ballard Power slipped 15%, Certicom dropped 10%. BCE Emergis, JDS Uniphase, Angiotech Pharmaceuticals and MDSI Mobile Data Solutions were all down sharply. Nortel dropped 3.3% in heavy trading. The so-called new rules for valuing tech stocks with no earnings were all broken today, sending investors fleeing.
These losses were tempered by a massive rally in mining, up 8.25%, and strength in financials and real estate. Mines, chemicals and transports were all up sharply on the TSE today. Investors went old school ditching high tech for Alcan, Potash Corp., Weyerhaeuser, Dupont and DaimlerChrysler. Inco ran up 19% on 1.6 million shares.
Even troubled Laidlaw recovered 17.5%, on 37.5 million shares. Apart from Laidlaw penny stocks dominate the volume board, all on the downside as much of the hype escapes those stocks.
The CDNX dropped 89 points to close at 4,287 on heavy volume of 109.1million shares. There was no rotation into small cap old economy stocks however. The index finished down 2% led by a 5% slip in tech stocks, but joined by miners down 1% and energy stocks off 2.3%. Ecompark Inc. was the hottest trade, closing down 10% to $4.24 on volume of 3.4 million shares.
Tomorrow, the U.S. Producer Price Index should be at the top of traders’ minds. A strong number ensuring rate hikes could spook traders that have so actively bought these interest-sensitive old economy stocks. The tech stocks that are supposed to be insulated from rate rises are already falling of their own accord. The PPI is followed by the Consumer Price Index on Friday. Also the European Central Bank is expected to raise rates tomorrow morning.