WATCH: Crude oil prices are at two-year low. While that’s good for gas prices, it’s not good for your investments. Vassy Kapelos has more on what’s behind oil’s decline and how it’s affecting your portfolios.
TORONTO – The Toronto stock market fell into correction territory Tuesday as worries about deteriorating global economic conditions helped to further erode year-to-date gains.
The S&P/TSX composite index dropped 197.34 points to 14,030.02, leaving the TSX down 10 per cent from its record high reached in early September. A drop of 10 per cent is viewed as an official correction. The loss left the TSX up about 3.5 per cent so far this year.
“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 0.09 of a cent to 89.06 cents US.
Get weekly money news
MORE: Stock markets are diving, here’s why
U.S. indexes were higher, clawing back some of the sharp losses from Monday as the Dow Jones industrials gained 95.01 points to 16,416.08 following a 233-point slide, the Nasdaq climbed 39.65 points to 4,253.31 while the S&P 500 index was ahead 12.94 points to 1,887.68.
The losses added to significant declines on markets over the last month. The selloff 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 runup 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 morning, down another 3.3 per cent as oil prices continued under pressure with the November contract in New York down $1.10 to US$84.64.
Financials and telecoms were also major weights on the Toronto market.
The gold sector limited TSX losses with a 4.2 per cent advance while December gold gained $3.70 to US$1,233.70 an ounce.
The base metals sector was ahead 0.34 per cent while December copper was up three cents to US$3.07 a pound.
There was further glum data from Europe’s biggest economy as the German government slashed its growth forecast for this year and next, deepening worries that Germany could slip into recession. The German Economy Ministry has cut this year’s growth figure to 1.2 per cent from 1.8 per cent earlier this year and next year’s to 1.3 per cent from two per cent.
On the corporate side, Canadian Pacific Railway (TSX:CP) lost $3.50 to $208.70 after news emerged that the railway made a pitch for U.S. railway CSX. CSX reportedly rebuffed the offer last week and it is unclear whether CP will make another run at the company. CSX stock was up about three per cent in New York after gaining six per cent Monday on speculation that CP won’t give up on acquiring the railroad, which would help it get North Dakota crude to American East Coast refineries.
Comments