Bargain hunters forage ahead of Bush speech: Dow gains 99 points, TSX up 13.5

www.canada.com MALCOLM MORRISON Canadian Press Tuesday, January 28, 2003 CREDIT: (AP/Stephen J. Carrera)

Traders negotiate a deal in the Euro Currency Futures pit at the Chicago Mercantile Exchange. (AP/Stephen J. Carrera)

TORONTO (CP) - Cautious buying of beaten-down stocks lifted markets Tuesday ahead of the U.S. president's state of the union address in the evening.

Some positive economic news and corporate earnings reports sent the Dow Jones industrial average 99.35 points higher to 8,088.91, after it had lost 141? points Monday to close under 8,000 for the first time since Oct. 14. Toronto's S&P/TSX composite index was held back by weakness in technology and energy stocks but managed a gain of 13.57 points to 6,570.09. Nortel lost 13 cents to $3.50.

Mining giant Noranda sank 41 cents to $14.55 after saying it is taking a $630-million writedown as it shuts down its new Magnola magnesium plant in Danville, Que., for at least a year. Brascan, which owns 40 per cent of Noranda, slipped 23 cents to $31.40.

The Canadian dollar continued to drop as investors took some profits from the dollar's runup of about 2.5 cents from Dec. 31 to a six-year high last Friday on the prospect of higher interest rates and U.S. dollar weakness. The loonie finished down 0.16 cent at 65.43 cents US, after losing as much as 0.51 cent at midday.

"It's nothing sinister," said Steve Butler, director of foreign exchange trading at Scotia Capital Markets.

"We've seen a variety of sort of bigger players, more along the lines of fund managers, taking profits on some long Canada positions."

The TSX Venture Exchange lost 3.54 points to 1,114.42.

The Nasdaq composite was up 16.92 points at 1,342.19 and the S&P 500 gained 11.03 at 858.50.

The market's gains were modest compared with the steep declines in recent sessions, a sign that investors were wary of big commitments ahead of President George W. Bush's speech on the state of the world.

Investors are hoping for a clearer indication of what action the U.S. intends to take against Iraq and what plans Bush has to fix an ailing economy.

"The overall environment is still very risky one to hold stocks and I think people are just jobbing the market, getting in and out quickly and not taking on long-term views," said Jeff Cheah, market strategist at MMS in Toronto.

"The prospects for war are very real and the outcome ranges from the most optimistic to the most pessimistic, but in between, until we get to that event, there's a lot of question marks regarding what kind of outcome the current tension would bring to the financial markets."

On the economic front, new data showed that U.S. consumer confidence continued to take a hit because of war fears and pessimism over the job market.

The Conference Board consumer confidence index dropped to 79 from a revised 80.7 in December. Analysts had been expecting a bigger decline.

That report was counterbalanced by another showing new home sales in the U.S. hit a record high in December to close out the best year ever as the lowest interest rates in four decades enticed home buyers.

Consumer giant Procter and Gamble exceeded expectations in posting net income of $1.49 billion US in its second quarter, compared with $1.3 billion US a year ago. Its shares rose $1.95 to $85 US.

Xerox jumped $1.40, or more than 15 per cent, to $9.45 US after the business machines maker reported it earned $19 million US in the fourth quarter, much better than expected.

Pharmaceutical giant Merck & Co. was also a favourite after fourth-quarter profits rose two per cent to $1.89 billion, matching expectations. Its shares finished $2.64 higher to $54.50 US.

In Canada, TransCanada PipeLines had lower revenues but higher profits for 2002, and raised its dividend to by two cents to 27 cents. Its shares gained 14 cents to $22.82.

Quebec-based grocery store chain Metro Inc. posted a 16 per cent increase in quarterly earnings to $35.3 million as sales climbed to $1.3 billion. Its shares were marked up 22 cents to $18.27.

CGI Group rose 14 cents to $7.27 after the technology services company said quarterly earnings surged 21 per cent to $37 million. Revenue was up almost 15 per cent.

Ballard Power surged $1.70 to $16 on indications Bush would propose a significant increase in spending on research into fuel-cell cars.

Aside from Bush's speech, investors were looking ahead to a U.S. Federal Reserve Board monetary policy announcement Wednesday afternoon. While any interest-rate move is regarded as unlikely, the Fed may provide clues to the direction of the economy.

On the TSX, declines beat advances 609 to 488, with 210 issues unchanged.

The gold sector rose as the bullion price picked up 60 cents to $370 US an ounce. Placer Dome was ahead 40 cents to $17.80.

The energy sector was down, although the price of crude oil rose 38 cents to $32.67 US a barrel in New York on Iraq war fears and Venezuela's continuing disorder. Shell Canada lost 92 cents to $46.06.

The financial sector finished higher with National Bank adding 58 cents to $31.83.

Canadian National Railway gained $1.10 to $61.93.

Toronto market volume was 202.8 million shares worth $2.35 billion.

The Nasdaq Canada index gained 1.02 points at 225.26.