TSX drops more than 150 points on sliding commodity prices
Published Tuesday, October 23, 2012 11:17AM EDT
Last Updated Tuesday, October 23, 2012 4:33PM EDT
TORONTO -- The Toronto stock market tumbled more than 150 points Tuesday amid sliding commodity prices as U.S. earnings disappointments and a fresh round of worry centred on Europe's debt crisis reminded investors about flagging global growth.
The S&P/TSX composite index closed off the worst levels of the session, coming back from a 262-point slide to fall 177.71 points to 12,225.84 with losses spread across all sectors, while the TSX Venture Exchange lost 18.9 points to 1,289.5.
U.S. markets were sharply lower in the wake of disappointments from Dow heavyweights DuPont and 3M.
The Dow industrials plunged 243.36 points to 13,102.53, the Nasdaq was down 26.5 points to 2,990.46 while the S&P 500 index fell 20.71 points to 1,413.11.
The Canadian dollar pared early losses as the Bank of Canada said it was keeping its key rate unchanged at one per cent while keeping intact language warning that it will raise rates at some point.
The currency dipped 0.01 of a cent to 100.74 cents US. It had earlier traded as low as 100.23 cents, its lowest level since early August, amid speculation that the central bank's statement would take a less hawkish stance on raising rates.
Instead the bank maintained the key message of previous statements -- that there will need to be modest rate hikes -- with the slight modification that added "over time" to the equation.
Meanwhile, chemical maker DuPont reported net income of US$10 million Tuesday, or a penny per share. Excluding one-time items, DuPont earned 44 cents per share, compared with 69 cents per share for last year's third quarter. The results fell short of the average estimate of 46 cents per share, and DuPont's stock slid nine per cent to US$45.25.
And conglomerate 3M said its third-quarter profit edged up to $1.16 billion, or $1.65 a share, which met estimates. Sales dipped 0.4 per cent to $7.5 billion, which missed expectations of $7.63 billion. 3M also cut its 2012 profit estimate to reflect "current economic realities." The variety of 3M's businesses and its worldwide footprint make it an economic bellwether and its shares fell $3.80 to US$88.73.
Some of the disappointing revenue is because of weakness in foreign markets. Multinational companies are having a hard time selling to Europe, which is struggling under a debt crisis and a spreading recession.
"The recession in Europe is very real," said Bernard Schoenfeld, senior investment strategist for Bank of New York Mellon Wealth Management in New York.
"It's not going to disappear very quickly, and it will certainly negatively affect earnings of exporters in the United States."
The red-hot growth enjoyed by emerging markets like China and India is also slowing.
Expectations for this earnings season were already muted with analysts expecting the first year-over-year drop since 2009.
Analysts at Credit Suisse said in a report Tuesday that "roughly 25 per cent of the way through the U.S. reporting season, annual earnings per share growth is broadly flat."
The financial sector fell 1.3 per cent amid major acquisition news from the Canadian banking sector.
Royal Bank of Canada (TSX:RY) confirmed it will acquire the Canadian auto finance and deposit business of Ally Financial Inc. The bank says its net cost for the deal will be about $1.4 billion but its shares got caught in the overall market downdraft and lost $1.66 to $56.94.
And U.S. discount retailer Target is selling its credit card portfolio to TD Bank Group (TSX:TD) for about $5.9 billion. TD also agreed to a seven-year deal to underwrite, fund and own the retailer's future credit card and Visa receivables in the United States. TD stock shed 83 cents to $82.09.
Commodities weakened amid a move by Moody's Investor Services to downgrade five Spanish regions to below investment grade.
Spain has been the flashpoint of the eurozone's credit crisis as the country endures its second recession in three years with near 25 per cent unemployment after the property market collapsed in the wake of the 2008 financial crisis, at the same time crippling the country's banks.
The base metals sector dropped 2.25 per cent as copper prices fell back with the December contract on the Nymex down five cents at US$3.57 a pound. Copper is viewed as an economic bellwether as it is used in so many applications. Teck Resources (TSX:TCK.B) shed 79 cents to $30.54.
Oil prices headed lower as concerns about demand prospects sent the December contract on the New York Mercantile Exchange down $1.98 to a three-month low of US$86.67 a barrel.
The energy sector lost almost two per cent as Suncor Energy (TSX:SU) gave back 72 cents to $32.66.
December bullion gave back $16.90 to US$1,709.40 an ounce, its lowest close since early September, and the gold sector lost about 2.5 per cent. Goldcorp Inc. (TSX:G) faded $1.13 to US$42.25.
Apple Inc. shares closed down $20.67 or 3.26 per cent to US$613.35 after it unveiled the iPad Mini, with a screen that's about two-thirds the size of the full-size model, and said it will cost US$329 and up. The price fits into the Apple product lineup between the iPad 2 at $399 and the latest version of the iPod touch at $299. But company watchers had been expecting Apple to price the iPad Mini at $250 to $300 to counter the threat of less expensive tablets like Amazon.com Inc.'s Kindle Fire, which starts at $159.
The Canadian quarterly earnings reporting season kicks into gear this week. Canadian Pacific (TSX:CP), Rogers Communications (TSX:RCI.B), gold producer Agnico Eagle Mines (TSX:AEM) and energy company EnCana (TSX:ECA) are among the companies reporting Wednesday.