TORONTO -- Uncertainty in China's economy and falling crude prices continued to erode investor sentiment in North American stock markets Tuesday, another signal that volatility in equities remains alive and well.
The S&P/TSX composite index in Toronto fell 82.19 points at 12,763.44, pulled down by losses in the energy and base metals sectors.
The April crude contract lost $1.52 at US$31.87 a barrel, as the Canadian dollar dipped 0.30 of a cent to settle at 72.63 cents US.
The negative sentiment continued in New York, with all the main indexes ending the day lower.
The Dow Jones industrial average was down 188.88 points at 16,431.78, while the broader S&P 500 composite index declined 24.23 points to 1,921.27. The tech-heavy Nasdaq composite lost 67.03 points to 4,503.58.
Portfolio manager Kash Pashootan says investors don't know where to go, because they see red everywhere they turn.
"The reality is we're going to see volatility so we need a long term perspective on anything we buy," said Pashootan, who works in Ottawa for First Avenue Advisory, a Raymond James company.
"This is not the type of environment where you want to try home runs because if you're wrong, you're going to lose a significant amount of your capital."
There have long been warning signs about the slowdown in the Chinese economy and a global oversupply of oil, but the question at the top of mind for most investors is: when will both catalysts reverse course?
Markets won't see a sustained, stable rally until both of these factors play out, he warns.
On Monday, crude prices rose after a report from the International Energy Agency said the pace of global oil production growth is dwindling as energy companies slash production to tighten their balance sheets. It was the latest in a string of data that showed output may be slowing down.
But Pashootan said investors may have been too quick to take this news at face value.
"The data that you're seeing with oversupply declining is really oil bulls cheerleading," he said.
"The reality is that we haven't seen any consolidating in the industry. We need to see 20 to 30 per cent of existing oil companies today go bankrupt and shut down operations before we see any meaningful decline in supply. We've seen some early stage signs that the oversupply is starting to erode, but we're in the second inning of a nine inning baseball game and there is still a lot more that needs to happen."
In other commodities, April natural gas was at US$1.83 per mmBtu, down three cents, while March copper was unchanged at US$2.11 a pound.
Bullion prices was the only bright spot, with April gold rising $12.50 to US$1,222.60 a troy ounce.
