Spooky news involving some of the big banks in North America led to downward markets on the last trading day of February.
Financials were negative following two days of strong gains, thanks to better-than-expected earnings reports from four of the big Canadian banks.
And nationalization concerns about U.S. banks grew in the wake of a deal that sees the U.S. government take a bigger stake in struggling banking giant Citigroup, one that could dramatically lower the portion owned by common shareholders.
Citigroup said the deal will give the U.S. government a 36% stake in the struggling bank.
The S&P/TSX Composite Index survived early scares to grow closer to Thursday’s close, but still finished the day in the red, losing 72.66 points, to 8,114.16.
The TSX financial sector lost with Royal Bank down 56 cents to $31.34 and CIBC lost $2.91 to $43.
Shares in TD Bank lost 44 cents to $37.53. Ed Clark has agreed to a contract extension and will stay on as president and CEO until the annual meeting in 2013. He also will take a pension freeze and waived the right to severance pay.
The TSX energy sector turned around to head higher even as oil prices fell after three days of gains that took prices back above the $45 U.S. a barrel level
EnCana Corp. gained $1.76 to $50.64 and Canadian Natural Resources improved 57 cents to $42.23.
The tech sector lent support with Research In Motion Ltd. ahead $1.56 to $51.38.
The gold sector edged up as Barrick Gold Corp. gained 53 cents to $39.90.
The Canadian dollar backpedaled 1.29 cents to 79.59 cents U.S., as Canada's current account balance with the rest of the world fell to its first deficit in nine years - reaching $7.5 billion - in the final quarter of 2008 as export volumes and prices decreased.
BAYSTREET
Among the 13 TSX sub-groups, gainers had the upper hand, seven to six, health-care stocks leading the day, up 2.5%, gold up 1%, and consumer staples, ahead 0.9%.
The downward groups were led by financials, down 3.1%, metals and mining, off 2.3% and industrials, sliding 1.3%.
The TSX Venture Exchange was retreated 1.15 points to 861.66 while the NASDAQ Canada index gained 1.71 points, to 410.56
ON WALLSTREET
The Dow Jones industrials index ended the day down 119.15 points, to 7,062.93, the lowest close since May 1, 1997.
The Standard & Poor’s 500 index tailed off 17.74 points, at 735.09, closing at its lowest point since Dec. 18, 1996, while the NASDAQ composite index lost 13.63 points to 1,377.84.
The tech-fueled Nasdaq has held up better than the other major averages this year and remains above its lows from Nov. 21, 2008.
Investors were further discouraged as fourth-quarter U.S. economic growth came in even worse than expected. Word that the economy contracted at a faster-than-expected 6.2% pace in the fourth quarter added to investors' worries.
Analysts forecast that the economy shrank at a pace of 5.4% from October through December. The government estimated a month ago that GDP fell at an annualized pace of 3.8%.
On the Citibank issue, the U.S. government, along with other private investors, will convert some of their preferred stock in Citi to common shares. If the maximum amount of preferred stock is converted, current common stockholders will see their ownership stake fall to about 26%.
Unhappy investors sent its shares down 91 cents or 37% to $1.55 U.S.
Investors are deeply concerned about moves to nationalize banks, thinking that such moves create an uneven playing field. The conversion will help provide Citi the mix of capital to withstand further weakening in the economy.
Shares in Bank of America - another target of nationalization speculation - fell $1.07 or 20% to $4.25 U.S.
In other company news, Dell reported weaker quarterly sales and earnings late Thursday that missed analysts' forecasts. The company also said it plans to cut an additional $1 billion U.S. a year from its annual expenses within two years, picking up the pace on an existing cost-cutting plan.
This seemed to reassure investors and shares rose 5% Friday.
General Electric was a weight in N.Y., down 10 cents to $9 U.S. after the Wall Street Journal reported the company will cut its quarterly dividend to 10 cents from 31 cents. The company had already warned that it would be evaluating its dividend level for the second half of the year in light of the growing uncertainty in the economy.
Cisco Systems advanced 25 cents to $14.74 U.S.
Treasury prices slipped, raising the yield on the benchmark 10-year note to 3.03% from 2.99% Thursday.
April crude contract on the New York Mercantile Exchange fell 92 cents to $44.30 U.S. a barrel
April bullion contract on the Nymex moved up $8.90 to $951.50 U.S. an ounce.
