Toronto stock market tumbles 173 points to five month low
Previously, Easyhome and Easygates split the royalties associated with the U.S. franchise network. Under the terms of the sale agreement, Easygates has acquired from Easyhome its rights to receive its share of those royalties.
Malcolm Morrison, The Canadian Press
Published Wednesday, April 17, 2013 10:17AM EDT
Last Updated Wednesday, April 17, 2013 7:46PM EDT
TORONTO -- The Toronto stock market sold off 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 172.64 points or 1.42 per cent to 11,947.29, the market's first close below the 11,000-mark since November 15.
"This clearly reflects a move to pricing in slower growth. The risk of deflation is back on the table (and) the effectiveness of central bank intervention is being questioned more," said Wes Mills, chief investment officer for Scotia Asset Management.
The Canadian dollar lost 0.58 of a cent to 97.41 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.
An earnings disappointment from Bank of America and sliding resource stocks also punished New York markets.
The Dow Jones industrials fell 138.19 points to 14,618.59, the Nasdaq composite index dropped 59.96 points to 3,204.67 and the S&P 500 index lost 22.56 points to 1,552.01.
U.S. indexes moved off the worst levels of the session mid-afternoon after the U.S. Federal Reserve's latest economic snapshot for late February and March showed economic activity expanded at a moderate pace. The central bank added that real estate construction is improving markedly in most districts.
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 sent 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 base metals component led decliners, down 7.34 per cent as copper, viewed as an economic bellwether, slid 12 cents to US$3.19 a pound. Worries about how lower commodities will impact corporate profits sent Teck Resources (TSX:TCK.B) fell $1.33 to C$25.42 while First Quantum Minerals (TSX:FM) declined $1.60 to $15.43.
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.
Further prospects for a sluggish recovery sent the May crude contract on the New York Mercantile Exchange down $2.04 to US$86.68 a barrel and the energy sector slid 2.57 per cent. Suncor Energy (TSX:SU) shed 43 cents to C$27.98 and Cenovus Energy (TSX:CVE) was down 73 cents at $28.71.
The gold sector was down about 4.3 per cent as bullion prices failed to find traction after a modest gain on Tuesday. The June contract on the Nymex declined $4.70 to US$1,382.70 an ounce. Barrick Gold Corp. (TSX:ABX) fell $1.07 or 5.56 per cent to $18.17. Barrick's stock price has plunged by a third since April 5, partly because of falling gold prices but also after a Chilean court last week ordered a halt to construction of the miner's $8 billion Pascua-Lama project on environmental concerns.
Iamgold (TSX:IMG) faded 26 cents to C$4.80.
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.
But it wasn't just resource stocks giving back gains -- blue chips also sold off with the financials sector down 0.8 per cent. Scotiabank (TSX:BNS) gave back 87 cents to $56.83.
In the U.S., 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 expectations by two cents per share and Bank of America shares lost 4.72 per cent to US$11.70.
The industrials component backed away 1.46 per cent as Canadian Pacific Railway (TSX:CP) dropped $1.92 to $121.92.
In New York, shares of Apple Inc. dropped 5.5 per cent to US$402.80 after earlier going as low as $398.11, the lowest level since Dec. 2011 after a supplier hinted at a slowdown in iPhone and iPad production.
The decline means Apple has, for now, lost its position as the world's most valuable publicly traded company to Exxon Mobil Corp., which has a market capitalization a few billion dollars above Apple's $380 billion price tag.
The TSX Venture Exchange gave back 36.40 to 923.60.