TORONTO -
Stock markets surrendered big gains and put in a weak close Thursday after U.S. President Barack Obama confirmed that Chrysler LLC is going into Chapter 11 bankruptcy protection.
While the move wasn't a surprise, it did undermine optimism that the recession is nearing a bottom.
Markets had been trying to factor in the likelihood of a Chrysler insolvency but "once investors become face-to-face with that reality, they have a different reaction," commented Jack Ablin, chief investment officer at Harris Private Bank in New York.
Toronto's S&P/TSX composite index came down from a 152-point surge and ended the day with a loss of 91.48 points at 9,324.83.
The Canadian dollar moved up 0.69 cent to 83.82 cents US after Statistics Canada said the economy shrank 0.1 per cent in February -- much less painful than the 0.7 per cent slide in January and better than the 0.2 per cent contraction economists were projecting.
The agency noted that economic activity has declined 2.4 per cent since October, but BMO Capital Markets economist Douglas Porter observed that "following an incredibly intense three-month plunge in Canadian output from November to January, the mild February decline seems like a relief -- a version of `been down so long, it feels like up' to the economy."
The TSX Venture Exchange was down 4.99 points to 1,008.98.
New York's Dow Jones industrial average was up by as much as 139 points before the Chrysler news, but closed down 17.61 at 8,168.12. The early gain had extended Wednesday's good feeling following the U.S. Federal Reserve's statement that economic contraction appears to be slowing.
Hopes that the worst could be over were bolstered by the U.S. Labour Department's report that jobless claims fell last week by 14,000 to 631,000. And the Chicago purchasing managers index, which tracks Midwest business conditions, jumped to 40.1 in April from 31.4 in March.
The Nasdaq composite index moved up 5.36 points to 1,717.3 while the S&P 500 index slipped 0.80 point to 872.81.
Despite the tepid ending to Thursday's session, the TSX index gained 6.9 per cent in April and the Dow industrials rose 7.3 per cent on the month.
This extended the spring rally which started March 10 as investors gathered hope that, while economic conditions will remain tough for some time, the world isn't likely to slither into another Great Depression.
The TSX is up 23.2 per cent since March 9 while the Dow has surged 24.75 per cent.
"I think it's a feel-good bear market rally," declared John Stephenson, vice-president at First Asset Funds.
"We're going to have another selloff and maybe in the next month or so. I'm amazed it's continuing at this rate but we're in a situation where people will grasp at anything."
However, Stephenson doesn't think the TSX will blow through its early-March low of 7,500.
The Chrysler developments -- including major planned production suspensions -- hit already knocked-down auto parts makers.
Magna International (TSX:MG.A) fell 3.2 per cent, Linamar (TSX:LNR) dropped 4.2 per cent and Wescast Industries (TSX:WCS) plunged 19 per cent, losing 21 cents to 90 cents.
Chrysler will form an alliance with Italian carmaker Fiat Group while the U.S. government, which has already provided $4 billion in loans into Chrysler, would pour in $8 billion more.
The Toronto energy sector was down 1.6 per cent as the June crude contract in New York inched up 15 cents to US$51.12 a barrel.
Canadian Oil Sands Trust (TSX:COS.UN) units were down $1.66 at $24.64 after its quarterly earnings came in at $43 million, down from $298 million a year ago.
ExxonMobil Corp.'s first-quarter profit fell 58 per cent from a year ago to US$4.6 billion as the world's biggest publicly traded oil company, like the rest of the industry, saw crude and gas prices fall precipitously. Its shares were down $1.77 to US$66.67.
Its Canadian subsidiary, Imperial Oil Ltd. (TSX:IMO), reported its profit plunged to $289 million from $681 million, and its shares moved 35 cents lower to $42.65 in Toronto.
The TSX financial sector slipped 0.5 per cent as Manulife Financial (TSX:MFC) gained 21 cents to $20.32 while Scotiabank (TSX:BNS) lost $1.03 to $33.94.
The base metals sector was ahead two per cent. Teck Resources Ltd. (TSX:TCK.B) gained 52 cents to $12.53 after finalizing a deal to sell its 40 per cent stake in Alaska's Pogo gold property for US$245 million.
Denison Mines Corp. (TSX:DML) rose 23 cents or 11.5 per cent to $2.24 after CEO Peter Farmer predicted the uranium price will heat back up to US$60 or $70 a pound over the next year on increasing demand and dwindling supply.
The Nymex June bullion contract was down $9.30 to US$891.20 an ounce and the Toronto gold sector faded almost four per cent.
