April 11, 2008 / 9:10 PM / 10 years ago

UPDATE 5-Toronto stocks beaten down by recession worries

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By Leah Schnurr

TORONTO, April 11 (Reuters) - The Toronto Stock Exchange’s main index shed more than 225 points on Friday, hit hard by deepening worries for a weak earnings season and another sign the United States may be sliding into a recession.

The sour tone was set early in the day by an unexpected drop in first-quarter profit by conglomerate General Electric (GE.N), seen as a bellwether for the U.S. economy.

The slump on Bay Street was exacerbated by sliding resource shares, which were hampered by soft commodity prices. Suncor Energy (SU.TO) fell C$3.02, or 2.8 percent, to C$106.82, while Barrick Gold (ABX.TO) was down C$1.24, or 2.8 percent, at C$43.76. The energy and materials sectors gave up 1.5 percent and 1.6 percent respectively.

Financials also lagged, losing 1.7 percent, with Bank of Nova Scotia (BNS.TO) down C$1.19, or 2.6 percent, at C$45.54. The Wall Street Journal reported on Thursday that Scotiabank had entered the bidding for a stake in troubled U.S. bank National City NCC.N.

Elsewhere in the sector, Royal Bank of Canada (RY.TO) fell 90 Canadian cents, or 1.9 percent, to C$46.38.

The S&P/TSX composite index .GSPTSE closed down 226.55 points, or 1.63 percent, at 13,683.03 with all 10 of its main sectors lower. It was the worst one-day decline in over three weeks.

The index managed to edge up just 0.1 percent for the week, after giving up the bulk of the week’s gains on Friday. But the composite has advanced 2.5 percent since the beginning of the month in the midst of recent boost in confidence.

The gloom set in early as GE, the second-largest U.S. company by market capitalization, reported a 6 percent drop in first-quarter profit, with earnings at its financial services arms off by about 20 percent. The weak results crushed investor sentiment and added to fears of a U.S. recession.

“I think (investors) should look at this and say we shouldn’t expect the economy to be too terribly high on delivering profits over the next while,” said Adrian Mastracci, portfolio manager and president at KCM Wealth Management Inc. in Vancouver.

“As a matter of fact, if we expected that they weren’t going to deliver as much profit as we thought (GE) was going to, we’d be in better shape because our expectations would probably be more in line with reality.”

Research In Motion RIM.TO, the maker of the BlackBerry, was among the biggest drags by weight on the TSX as it slid C$4.61, or 3.7 percent, to C$118.76.

Shares of Shaw Communications (SJRb.TO), the country’s No. 2 cable and satellite TV company, bucked the downward trend, climbing 84 Canadian cents, or 4.2 percent, at C$21.05. Shaw said its second-quarter profit more than tripled amid a tax recovery, solid subscriber gains and higher prices.

The recent boost in optimism seemed to evaporate as GE’s results brought some negativity back into the market’s attitude, but Mastracci said it was not in a huge amount of pessimism.

“Clearly there’s a shift today,” said Mastracci. “I think people have stood up and noticed something isn’t as good as we might have thought it was.”

Market volume was 332 million shares worth C$6.3 billion. Decliners outpaced advancers 983 to 552. The blue chip S&P/TSX 60 index .TSE60 closed down 14.07 points, or 1.72 percent, at 805.70.

Stocks also plunged in New York, yanked down by worries fueled by GE and data that showed U.S. consumer sentiment was at a 26-year low. The Dow Jones industrial average .DJI ended down 256.56 points, or 2.04 percent, at 12,325.42, and the Nasdaq composite index .IXIC fell 61.46 points, or 2.61 percent, to 2,290.24.

$1=$1.02 Canadian Editing by Rob Wilson

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