TORONTO – The Toronto stock market flirted with correction territory mid-afternoon Tuesday as worries about deteriorating global economic conditions helped further erode year-to-date gains.
The S&P/TSX composite index was off early losses but still down 143.26 points at 14,084.1. The main index had plunged as much as 250 points in the morning, leaving the TSX down 10.2 per cent from its record high reached in early September. A drop of 10 per cent is viewed as an official correction.
“I think it’s fear myself,” said Ian Nakamoto, director of research at 3MACS.
“There’s enough things to be worried about. Fears over Europe slowing, (the Federal Reserve’s) quantitative easing ends at the end of this month, people are talking about U.S. interest rates that could rise sooner than expected, the strong U.S. dollar and Ebola. There are more than enough things to weigh on investor psychology.”
The Canadian dollar lost 0.44 of a cent to 88.71 cents US as traders avoided risky assets such as commodity-based currencies and bought into the U.S. greenback.
U.S. indexes were higher, clawing back some of Monday’s sharp losses as the Dow Jones industrials gained 48.9 points to 16,369.97 following the previous day’s 233-point slide. The Nasdaq climbed 21.66 points to 4,235.32 while the S&P 500 index was ahead 8.58 points to 1,883.32.
The losses added to significant declines on markets over the last month. The sell-off accelerated last week amid a string of disappointing German data and a global economic downgrade by the International Monetary Fund.
New York markets were also at or near record highs at the beginning of the current downturn.
The slide on Wall Street had been widely anticipated since there hasn’t been a meaningful correction on U.S. markets for about three years.
Meanwhile, a strong run-up in the resource sector had pushed the TSX up as much as 14 per cent year to date last month.
But these sectors have also taken the brunt of punishment as global economic worries pushed oil to 22-month lows, taking the energy sector down seven per cent last week alone. Base metals, equally vulnerable to a global slowdown, fell almost eight per cent last week.
The energy sector led TSX decliners Tuesday, down another three per cent as oil prices remained under pressure with the November contract in New York down $3.44 to US$82.30 a barrel, its lowest level since mid-June, 2012. Prices dropped to session lows after the International Energy Agency slashed its oil-demand growth forecast for this year by more than a fifth because of weakening growth.