September 29, 2008 / 1:43 PM / 9 years ago

Toronto stocks drop 7 percent as U.S. rejects bailout

<p>A general view of the TSX (Toronto Stock Exchange) Broadcast Centre in Toronto June 20, 2008.Mark Blinch</p>

TORONTO (Reuters) - The Toronto Stock Exchange's main index tumbled nearly 7 percent on Monday, the biggest drop in eight years, as U.S. lawmakers rejected a proposed $700 billion bailout of the financial services sector, sending investors fleeing for the exits.

As the U.S. House voted to reject the Wall Street rescue plan, concerns mounted that the fallout from the crisis in the United States was spreading rapidly around the globe and that the world economy was headed for a sharp downturn.

The S&P/TSX composite index dropped 840.93 points, or 6.93 percent, to 11,285.07, its biggest percentage drop since October 2000, when markets were roiled by the bursting of the tech bubble. On a points basis, it was the biggest decline ever.

"This is yet another Black Monday," said John Ing, president at Maison Placements Canada.

Fueling the carnage on the market was a $10 drop in the price of oil, prompted by rising concerns of a global slowdown, which sent the heavily weighted energy sector down more than 10 percent.

That, along with concerns over base metal prices and general nervousness over the bailout package, kept stocks under pressure for most of the session.

But the picture got worse at mid-afternoon, with the index plunging 300 points in just over five minutes as results showed the congressional vote going against the plan.

"The first thing that all the people did was hit the sell button," said Andrew Martyn, portfolio manager at Davis-Rea. "Uncertainty is not the friend of this market."

All 10 TSX subgroups ended down, with energy stocks led lower by Canadian Natural Resources, which fell 19 percent at C$65.27, and Talisman Energy, which dropped 12.9 percent to C$14.04.

Financial issues retreated 5.8 percent, losing a lot of ground after the U.S. vote, while the materials sector dropped 5.9 percent despite strength among gold stocks as bullion benefited from its safe-haven investment status.

Base metals miner Ivanhoe Mines led the way, dropping 29 percent to C$5.65, while diversified miner Teck Cominco retreated 13.9 percent to C$28.92, and fertilizer producer Agrium fell 14.5 percent to C$56.36.

All told, only eight index-listed stocks made gains on the day, with mining giant Barrick Gold providing the most upward thrust. It climbed 5.8 percent to C$40.44 as gold spot prices pushed above $900 an ounce.

BlackBerry maker Research in Motion lost 9.1 percent to finish at C$65.97, after dropping 28 percent in the previous session.

Manulife Financial slid 4.1 percent to C$36.25, outperforming other financials as the company's CEO said the insurer is in "an excellent position" to weather the ongoing financial-market turmoil compared with industry peers.

Gavin Graham, director of investments at BMO Asset Management, said the outlook for the market is uncertain until some sort of package is passed.

"It's a question of having the political will and determination to bring the meeting of the minds, and that will happen eventually," he said.

"Until it does, obviously the market's going to be volatile and biased to the downside."

Total market volume was a heavy 507.7 million shares, valued at C$8.6 billion. Declining issues outnumbered advancers by a wide margin, 1,489 to 200.

The blue-chip S&P/TSX 60 index slid 50.30 points, or 6.9 percent, to 676.45.

In New York, the Dow Jones industrial average fell 777.68 points, or 6.98 percent, to 10,365.45, notching its biggest one-day drop ever, while the Nasdaq composite dropped 199.61 points, or 9.14 percent, to 1,983.73.

($1=$1.045 Canadian)

Additional reporting by Scott Anderson, Wojtek Dabrowski and Jennifer Kwan; editing by Rob Wilson

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