TSX drops on Royal Bank share sale
The Toronto stock market fell more than 150 points yesterday as the Bank of Canada declared the economy was moving into a recession and cut its main interest rate by three-quarters of a point to 1.5 per cent.
Bank stocks led the way down as Toronto’s S&P/TSX composite index fell 169.56 points, or 1.98 per cent to 8,397.56. Royal Bank led a 4.7 per cent drop in financial shares after saying it will sell as much as $2.3 billion of new common stock.
“Royal’s issue has shaken market confidence a bit,” said Michael Sprung, president of Sprung & Co. Investment Counsel in Toronto. “The public’s constantly told how strong the banks are, and yet they have to come to market at depressed prices. Its not good for shareholders.”
RBC lost $2.21 to $35.29 while TD Bank was down $3.40 to $42.10.
The loonie closed down 0.66 cents (U.S.) at 79.08 cents after dropping more than a cent shortly after the central bank cut its key rate to the lowest level since 1958 and added that "the global recession will be broader and deeper than previously anticipated."
The telecom sector was off 2.25 per cent as BCE Inc. fell $2.15 (Canadian) to $22 car insurance.50.
The industrial sector gave back 1.4 per cent as Canadian National Railway declined $1.56 to $42.75.
The energy sector was flat as oil prices flattened on expectations of weakening demand. The January crude contract in New York fell $1.64 (U.S.) to $42.07 a barrel.
The gold sector rose 1.45 per cent with the February bullion contract ahead $4.90 to $774.20. Barrick Gold Corp. faded 75 cents (Canadian) to $35.10.
Falling financial stocks also sent New York markets sharply lower, as did negative outlooks from FedEx Corp. and Texas Instruments Inc. New York’s Dow Jones industrial average fell 242.85 points to 8,691.33, while the Nasdaq composite index fell 24.4 points to 1,547.34. The S&P 500 index dropped 21.03 points to 888.67.
Traders were disheartened as chip maker Texas Instruments warned of sales and profits running "significantly" below expectations, and FedEx cut its forecast as the weak economy crushes parcel deliveries.
From the Star’s wire services