UPDATE 2-Toronto stocks slump amid credit woes

Mon Mar 17, 2008 2:49pm EDT
 
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(Updates to afternoon)

TORONTO, March 17 (Reuters) - The Toronto Stock Exchange's main index dove on Monday in its biggest one-day drop in nearly two months, as the impact of the global credit crisis deepened.

Sharp declines by resource issues worsened the selloff on Bay Street, driving the TSX far lower than its U.S. counterpart, as oil prices retreated and investors worried about the impact of the stumbling U.S. economy on the demand.

The heavyweight energy and financial sectors were down 3.4 percent and 2.4 percent respectively. Suncor Energy SU.TO slid C$3.43, or 3.3 percent, to C$100.70, while Toronto-Dominion Bank TD.TO dropped C$1.62, or 2.6 percent, to C$59.67.

"It seemed to me surprising that we've seen for the last few weeks worries about a global slowdown and yet record highs in commodity prices," said Kate Warne, Canadian market strategist at Edward Jones in St. Louis, Missouri.

"That disconnect now is being eliminated. Unfortunately, it's being eliminated on the side where investors are coming to believe more seriously that the U.S. economy is slowing and, with the credit crunch having lasted and gotten worse than what was expected, that those have negative implications for U.S. growth and probably the rest of the world."

The S&P/TSX composite index .GSPTSE was down 355.95 points, or 2.69 percent, at 12,896.89 by Monday afternoon, with all but one of its 10 main sectors in negative territory. The index was briefly down more than 400 points, the biggest intraday decline since mid-January.

Banking shares were shaken as worries over the health of U.S. financial markets intensified after the purchase of Bear Stearns BSC.N by JP Morgan Chase JPM.N for the fire sale price of $2 a share, far below its closing price of $30.85 on Friday.

As well, the U.S. Federal Reserve made an emergency 25 basis point cut to its discount rate on Sunday and widened its lending range of big financial firms.   Continued...