UPDATE 3-Toronto stocks in biggest intraday drop since 2001

Mon Jan 21, 2008 12:39pm EST
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By Scott Anderson and Jonathan Spicer

TORONTO Jan 21 (Reuters) - Canada's main stock market index plunged to its lowest level in more than 14 months on Monday, following a rout in overseas markets, as persisting worries over the wellbeing of the U.S. economy sent investors running for the doors.

By early afternoon, the Toronto Stock Exchange's S&P/TSX composite index .GSPTSE was down 553.73 points, or 4.35 percent, at 12,183.39. Earlier in the session, it had fallen as much as 617 points.

It represents the biggest intraday plunge since Feb. 16, 2001, when the benchmark dropped 625 points, or nearly 7 percent, after tech giant Nortel Networks NT.TO cut its revenue forecast in half and announced mass layoffs.

The TSX followed world markets lower as investors doubted an economic stimulus package unveiled late last week by U.S. President George W. Bush would be enough to shore up the world's largest economy, which has been battered by the housing crisis and credit crunch.

"This is definitely a sign of evacuation in investor confidence, warranted or not, and will put even more pressure on central banks to respond with rate cuts," Andrew Pyle, an investment executive at ScotiaMcLeod, said in a note.

The closely watched U.S. markets were closed for the Martin Luther King Day holiday. The United States is Canada's biggest trading partner, and any slowdown there would hit the profits of Canadian corporations.

Every one of the TSX index's main groups fell, led by a 5.9 percent drop in the materials sector and a 5.1 percent fall by energy shares. The heavily weighted financial group tumbled 3.4 percent.   Continued...