Financial News

Toronto’s stock market took a nasty tumble yesterday along with oil prices and the Canadian dollar after a World Bank report dashed hopes of an early "green-shoots" recovery from the current economic storm.

Led by energy and materials stocks, the S&P/TSX composite index fell 4.4 per cent, or 453.77 points to 9,834.18 – its biggest point drop since Dec. 1 – while crude oil slid more than $2 (U.S.) a barrel, cutting short the spring rally that investors have enjoyed of late.

"There’s a bit of a reality check going on," said Craig Wright, RBC Financial Group’s chief economist.

"There was a fairly significant rally recently, but the markets have been getting ahead of themselves in our opinion, and we’re seeing a retracing of that."

Stock markets and commodities took a hit after yesterday’s World Bank report said the global economy will contract more than previously thought. The bank said the globe’s economy will shrink 2.9 per cent this year – an estimate far worse than its previous forecast for a 1.7 per cent decline.

"I think as we go through this year volatility and uncertainty are going to remain quite elevated," Wright added.

"Some people might be locking in some of the profits that they made over the last three months," said Bruce Latimer, a trader at Dundee Securities.

"It was selling right across the board and they didn’t even try to rally the market at all, so we might be in for a few more days of this."

"People continue to be worried about the overall economy," said Royden Richardson, vice-chairman of Richardson Partners Financial Ltd. in Toronto, which oversees $7 billion (Canadian) of client assets.

"Stocks got a bit ahead of themselves. You just can’t get back to normal that quickly."

The loonie continued its downward slide, falling 1.34 cents (U.S.) to 86.76 cents against a stronger greenback.

All of the TSX’s 10 main sectors ended down, led by a 6.5 per cent drop in the energy group and a 5.97 per cent sell-off in materials.

The pullback follows a considerable rally since the index hit a five-year low in March. At one point this month it was up 43 per cent from the March trench cash advance no faxing. Yesterday’s retreat was the TSX’s lowest close since May 15, taking it below the 10,000 mark.

Gold mining shares also fell as the bullion price shed $15 to close at $920.60 in New York.

And burgeoning supplies of crude and gasoline finally appeared to grab hold of energy prices that since early May have appeared to shake off market fundamentals.

Benchmark crude for July delivery dropped $2.62 to settle at $66.93 on the New York Mercantile Exchange. The July contract expired later yesterday, and most of the trading already has shifted to the August contract, which lost $2.52 to settle at $67.50.

The TSX Venture Exchange gave back 40.14 points to 1,078.66.

U.S. markets were also lower.

The Dow Jones industrial average fell 200.72 points to 8,339.01, after giving up almost 3 per cent last week. The Nasdaq composite index lost 61.28 points to close at 1,766.19, while the S&P 500 dropped 28.19 points to 893.04.

On the Nasdaq, big-cap technology stocks led the decline.

Apple Inc.’s stock fell 1.5 per cent to $137.37 even as it said it had sold more than one million of its newest iPhone in the first three days of its launch, beating expectations. The company statement also quoted chief executive Steve Jobs, leading at least one analyst to speculate he was back from medical leave.

The Toronto base metals sector was down more than 9 per cent as the price of copper in New York fell 11.85 cents to $2.132 a pound.

Peter Cardillo, chief market economist at brokerage house Avalon Partners Inc. in New York, said investors want to see stability in commodity prices – not a surge or a tumble. A sharp rise in commodity prices hurts consumers, while a sharp drop is sign of weak demand.

Teck Resources Ltd. shares were down $2.07 (Canadian) to $16.76 even though Teck said Friday it expects its 2009 coal sales to be at the upper end of its guidance.

The financial sector fell 3.5 per cent, with Royal Bank of Canada down 90 cents to $45.10.

With files from the Star’s wire services

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