TSX negative amid new round of economic concerns

The Canadian dollar was ahead 0.17 of a cent at 92.11 cents US.

U.S. indexes registered gains amid a disappointing read on consumer confidence but a strong showing for housing starts.

The Dow Jones industrials climbed 44.5 points to 16,491.31, while the Nasdaq gained 21.3 points to 4,090.59 and the S&P 500 index rose 7.01 points to 1,877.86.

Markets finished in negative territory overall for the week after data showed the economic recovery in Europe is more fragile than thought, while retail giant and economic barometer Wal-Mart Stores delivered a disappointing outlook for the second quarter.

Meanwhile, the University of Michigan’s latest consumer sentiment index also offered a glum reading. The index registered 81.8 for this month, well below the 85 level that had been expected.

However, U.S. housing starts for April came in at an annualized pace of 1.072 million units, higher than the 980,000 that economists had expected.

This has also been a remarkable week in the fixed income area where bond yields have fallen sharply amid equity market nervousness.

The benchmark U.S. 10-year Treasury bond was at 2.52 per cent Friday afternoon, after starting the week at 2.66 per cent and going as low as 2.47 per cent on Thursday.

“I think that has got more focus than anything and justifiably because people are worried that (lower yields are) anticipating a recession,” said Wes Mills, chief investment officer Scotia Private Client Group.

Mills notes the move started out of Europe earlier this week as a flight to safety targeted U.S. Treasuries. Yields on those bonds are about 1.2 percentage points higher than German 10-year bonds. On top of that, investors think that stocks in North America are largely fairly valued right now and economic conditions don’t warrant significant moves higher, conditions which make bonds attractive.

“So you add into that it’s been a long great recovery, and so you hit a key level like 1,900 on the S&P (hit briefly on Wednesday), and some asset allocation models kick in and people start buying bonds and selling equities.”

Mills thinks this situation portends a market that is likely in for a good deal of sideways action along with a fair bit of volatility as traders look for direction.

In earnings news, private equity firm Onex Corp. (TSX:OCX) reported quarterly consolidated net profit of $99 million, up from a net loss of $271 million a year ago. Revenues were up three per cent to $6.5 billion. Onex says it’s increasing its quarterly dividend 33 per cent to five cents and its shares declined 88 cents to $62.47.

The financials sector was the biggest weight on the TSX, down 0.75 per cent ahead of the release of quarterly earnings by the big banks starting next week.

The gold sector faded about 1.1 per cent as June bullion edged 20 cents lower to US$1,293.40 an ounce.

June crude gained 52 cents to US$102.02 a barrel and the energy sector dropped almost one per cent.

The base metals sector was down 0.67 per cent, while July copper was unchanged at US$3.15 a pound.

There was also major merger and acquisition activity Friday morning as restaurant chain Red Lobster is to be sold to investment firm Golden Gate Capital for US$2.1 billion.

For the week, the TSX drifted 0.13 per cent lower while the Dow industrials lost 0.6 per cent.