By Malcolm Morrison, The Canadian Press
TORONTO – The Toronto stock market sold off late morning Wednesday as worries about the pace of global growth raised concerns about demand for commodities and sent prices for energy and metals lower.
The S&P/TSX composite index lost 157.47 points or 1.3 per cent to 11,962.45. The Venture was hit 38 points to 921.
“This clearly reflects a move to pricing in slower growth, the risk of deflation is back on the table, the effectiveness of central bank intervention is being questioned more,” said Wes Mills, chief investment officer for Scotia Asset Management.
The Canadian dollar lost 0.64 of a cent to 97.35 cents US as the Bank of Canada announced it was leaving its key rate unchanged amid continued economic weakness. The central bank also cut its 2013 economic growth forecast to 1.5 per cent from an earlier estimate of two per cent.
Earnings disappointments from Bank of America and Yahoo and sliding resource stocks also punished New York markets.
The Dow Jones industrials fell 163.71 points to 14,593.07, the Nasdaq composite index dropped 61.84 points to 3,202.79 and the S&P 500 index lost 24.33 points to 1,550.24.
The dismal showing on markets followed a sharp selloff Monday, triggered by lower than expected growth data from China.
And it led analysts to think that the American markets are in the midst of a retracement that some thought inevitable after the sharp gains of the year so far that send the Dow and S&P 500 indexes up well over 10 per cent year to date.
The Toronto market hasn’t fared nearly so well, up about 3.5 per cent year to date earlier this month and now down for the year by about the same amount. However, a full-scale retracement isn’t expected.
“To have a serious correction (on the TSX) we have to start thinking about a rollover into another recession,” Mills said.
“Growth has clearly slowed but we’re nowhere close to pricing in a recession.”
Oil and copper prices retreated a day after the International Monetary Fund lowered it global economic growth projections. The IMF cut its forecast for global growth to 3.3 per cent this year from its forecast in January of 3.5 per cent. The IMF predicts that government spending cuts will slow U.S. growth and keep the euro currency alliance in recession.
The IMF is keeping its prediction of four per cent global growth in 2014.
The base metals component led decliners, down 6.7 per cent as copper, viewed as an economic bellwether, slid 12 cents to US$3.19 a pound. Teck Resources (TSX:TCK-B.TO) fell $1.24 to C$25.51 while First Quantum Minerals (TSX:FM.TO) declined $1.59 to $15.44.
Both oil and copper sustained steep declines on Monday after data showed that the Chinese economy grew at a 7.7 per cent rate in the most recent quarter, crushing hopes for growth of around eight per cent.
That prompted some private sector economists to cut their full-year growth forecasts for the world’s second-biggest economy, although they remained at a still robust level of just under eight per cent. The World Bank reduced its growth outlook this week from 8.4 per cent to 8.3 per cent.
On Wednesday, China’s government promised steps to boost domestic consumption as a driver of the economy.
Further prospects for a sluggish recovery sent the May crude contract on the New York Mercantile Exchange down $1.25 to US$87.47 a barrel and the energy sector slid 2.65 per cent. Suncor Energy (TSX:SU.TO) shed 58 cents to C$27.83 and Cenovus Energy (TSX:CVE.TO) was down 71 cents at $28.73.
Financials also weighed as Scotiabank (TSX:BNS.TO) gave back 71 cents to $56.99.
The gold sector was down about 0.5 per cent as bullion prices struggled to find traction after a modest gain on Tuesday. The June contract on the Nymex declined $1.50 to US$1,385.90 an ounce. Goldcorp Inc. (TSX:G) advanced 33 cents to C$28.66 while Iamgold (TSX:IMG.TO) faded six cents to C$5.
Gold tumbled $140 on Monday to its lowest level in more than two years.
There have been a few reasons advanced for the steep drop in gold prices that started last week, including the prospect of troubled eurozone countries selling off part of their gold reserves to tackle debt problems.
On the earnings front, Bank of America’s profit soared to $2.3 billion or 20 cents a share in the first quarter, up nearly seven times from a year ago. However, that still missed the expectations of analysts polled by FactSet, who had expected 22 cents per share.
The bank’s revenue was up down eight per cent to $23.9 billion after stripping out an accounting charge, but it beat analysts’ expectations of $23.3 billion. Bank of America shares lost 4.5 per cent to US$11.73.
Yahoo Inc. earned $390 million, or 35 cents per share, in the first three months of the year. Earnings ex-items came in at 38 cents, beating expectations for 25 cents.
After subtracting ad commissions, Yahoo’s revenue stood at $1.07 billion, about $30 million below analyst projections and its shares lost 15 cents to $23.64.