TORONTO (Reuters) - Toronto’s main stock index plunged more than 250 points on Wednesday, touching its lowest level in more than a month, after the Federal Reserve promised new stimulus action to boost the struggling U.S. economy but also painted a grim picture of the outlook for growth.
The Fed, as expected, said it would buy more long-term Treasury bonds in an effort to lower longer-term rates and borrowing costs. But investors worried the central bank’s latest plan would have little impact in an economy that appears to be stagnating. .N
“The stimulus that they talked about is a lot less than what people were hoping for,” said Michael Sprung, president of Sprung & Co Investment Counsel.
“The fear is that things are going to continue at a very very slow pace.”
The Toronto Stock Exchange’s S&P/TSX composite index .GSPTSE closed down 254.87 points, or 2.09 percent, at 11,955.01. It fell as low as 11,948.40, its weakest level since August 10.
The selloff was broad-based, with all 10 of the TSX’s main groups finishing lower. Base-metal miners and energy companies were among the hardest hit, falling along with copper and oil prices.
Suncor Energy (SU.TO) was down 2.6 percent at C$28.13, while Potash Corp POT.TO lost 2.6 percent to C$50.37, and Teck Resources TCKb.TO dropped 5.8 percent to C$34.03.
“It’s a resetting of valuation and prospects to the downside for both these categories, based on an outlook for economic growth that has to come down. These are pieces of the puzzle that tend to absorb that negativity the most,” said Greg Eckel, senior vice-president at Morgan Meighen & Associates.
The economic uncertainty drove the industrials group down 4.1 percent. Canadian National Railway (CNR.TO) was the top heavyweight decliner, dropping 4.3 percent to C$65.65.
Even traditionally safe-haven gold fell 1 percent as the U.S. dollar climbed against major currencies, weighing on gold-mining shares. Goldcorp G.TO fell 2.1 percent to C51.51.
In its policy statement issued after the close of its two-day meeting, the Fed cited “significant downside risks to the economic outlook.”
It said U.S. economic growth remains slow, and that recent indicators point to continuing weakness in overall labor market conditions, while the unemployment rate remains elevated.
“The realization is building in that there’s no quick fix to this problem,” said Eckel. “Things may be getting worse rather than better.”
Editing by Peter Galloway and Rob Wilson