CANADA STOCKS-TSX plunges 4 percent, S&P downgrade stokes fears

Mon Aug 8, 2011 5:44pm EDT
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 * TSX tumbles 491.21 points, or 4.04 percent, to 11,670.96
 * Hits lowest since Aug. 25, 2010
 * Suffers biggest intraday slide since March, 2009
 * Cut to U.S. AAA rating shakes investor confidence
 * All 10 sectors lower, led by oil and gas
 (Adds further detail, analyst comment)
 By Trish Nixon
 TORONTO, Aug 8 (Reuters) - Toronto's main stock index
plunged to its lowest level in nearly a year on Monday,
tracking a fall in world equities and commodity prices, on
rising fears of a U.S. recession exacerbated by the United
States' loss of its triple-A credit rating.
 The index, which saw its biggest intraday slide since
March, 2009, closed down more than 4 percent as the U.S.
downgrade hammered investor confidence across the
 "It's a pretty scary day," said Elvis Picardo, strategist
and vice president of research at Global Securities in
 "It's not just the ratings downgrade in the U.S. It's also
intensifying concern about the impact the ratings downgrade
would have on global economic growth, and you are seeing that
manifest itself in a sell-off in energy and material prices."
 The energy sector led the index's dive, dropping 7.21
percent as oil plunged 5 percent, crashing below technical
support levels. Suncor Energy (SU.TO: Quote) was the most influential
decliner, down 6.93 percent at C$30.10. Canadian Natural
Resources (CNQ.TO: Quote) lost 6.2 percent to trade at C$33.05.
 The financial sector, down 3.69 percent, also weighed
heavily. Royal Bank of Canada (RY.TO: Quote) down 3.1 percent at
C$48.51, and Manulife Financial (MFC.TO: Quote), which shed 8.3
percent to C$12.53, were leading decliners.
 The Toronto Stock Exchange's S&P/TSX composite index
.GSPTSE closed down 491.21 points, or 4.04 percent, to
 Earlier in the session it fell to 11,617.81, its biggest
intraday fall in more than two years and its lowest point since
Aug. 25.
 The index has fallen nearly 9 percent in the last three
sessions and more than 18.5 percent since March 7, when it
touched its 2011 high.
 "I would refer to it as close to capitulation. Any day when
you have the S&P down nearly 500 points and the Dow .DJI off
over 500 points, I would consider it an emotional panic on the
part of investors," said Paul Taylor, chief investment officer
at BMO Harris Investment Management Inc.
 Canadian stocks did slightly better than their U.S. peers.
Panicked selling on heavy volume drove the S&P 500 .SPX down
more than 6 percent, with every stock in the benchmark index
ending in negative territory. [.N]
 Industrial metals also fell sharply, weighing on Canadian
base-metal miners. Teck Resources TCKb.TO was among the
heaviest weights as it fell 9.2 percent to C$37.81. [MET/L]
 But gold miners were seen as a relative safe-haven
investment, with the price of bullion vaulting to a record over
$1,700 an ounce. Barrick Gold (ABX.TO: Quote) was up 2.29 percent to
C$45.92, topping the minority of advancers that were mostly
gold miners. Goldcorp gained 2.1 percent at C$46.31 (G.TO: Quote)
 All told, materials, home to gold-mining stocks, were down
1.77 percent with the index's gold subgroup helping to cushion
losses, up 1.86 percent.
 The anxiety about the U.S. economy was matched by rising
worries about Europe's debt problems. Even the European Central
Bank's dramatic intervention in bond markets, which pushed down
yields on Spanish and Italian bonds, was not enough to stem
selling. [nLDE7770NM]
 Investors are looking to a meeting of the U.S. Federal
Reserve on Tuesday for signs of further support for reeling
financial markets and the economy.
 While most analysts still expect the Federal Reserve to not
make any major changes in policy at its meeting on Tuesday,
some are beginning to wonder whether the market disruptions of
recent sessions warrant some kind of central bank intervention.
 (With additional reporting by Andrea Hopkins; Editing by
Jeffrey Hodgson)