3 Min Read
TORONTO (Reuters) - The Toronto Stock Exchange's main index ended its brief winning streak by plunging more than 450 points on Tuesday, as it was hit by disappointment over a smaller-than-expected rate cut by the Bank of Canada and by falling commodity prices.
The Bank of Canada was largely forecast to cut its key rate by 50 basis points and the central bank's lowering of its overnight rate to 2.25 percent from 2.50 percent failed to fulfill expectations.
"It was widely expected that they were going to cut," said Levente Mady, broker at MF Global Canada, in Vancouver. "The question mark was whether they were going to cut 25 or 50. That might have been a little disappointing."
The TSX index was also weighed down by a quarterly loss reported by big insurer Sun Life Financial Inc, which was hit by credit-related writedowns and a decline in equity markets.
"The focus once again seems to be turning to the real economy and to earnings reports," said Elvis Picardo, an analyst and strategist at Global Securities in Vancouver.
"You had a substantial decline in U.S. equities and that sort of sentiment got into the Canadian side as well," Picardo said.
"You add that to a less-than-upbeat assessment from the Bank of Canada about the prospects of the economy going forward and that all adds to a fairly negative tone that is hard to overcome in a market like this."
The S&P/TSX composite index snapped its two-day winning streak to close down 455.60 points, or 4.44 percent, at 9,795.80, with all but one of its 10 main groups lower. The small healthcare sector eked out a 3.9 percent gain.
The retreat marked a sharp turnaround from Monday's rise of 7.2 percent and Friday's gain of more than 3 percent.
The materials group led the way down, dropping 7.97 percent on falling prices for gold and base metals amid fears that a global recession would cut demand.
Adding to the pressure were FNX Mining and North American Palladium, which dropped 13.8 percent and 18.3 percent respectively after they became the latest Canadian base metal producers to announce mine closures due to sinking prices.
The oil and gas sector dropped 4.9 percent as oil fell $3.36 to $70.89 a barrel, pressured by expectations that a economic downturn would also cut demand for oil, which could limit the impact of any planned supply cuts by OPEC.
Suncor Energy was off 5.5 percent at C$28.83, while Imperial Oil shed 7.1 percent to C$39.73.
Market volume was a heavy 421.7 million shares worth C$6.09 billion. Decliners outpaced advancers 908 to 621. The blue chip S&P/TSX 60 index closed 30.72 points lower, or 4.96 percent, at 589.05.
On Wall Street, stocks were hit by the pullback in commodity prices and as disappointing corporate earnings raised worries about the faltering profit outlook.
The Dow Jones industrial average fell 231.77 points, or 2.5 percent, to 9,033.66, while the Nasdaq composite index ended down 73.35 points, or 4.14 percent, at 1,696.68.
Reporting by Jennifer Kwan; editing by Rob Wilson