TSX 3-day losses top 900
RTGAM
Another day, another rout.
The spectacular selloff on North American stock markets continued Thursday, with Canada's benchmark index now suffering three-day losses of more than 900 points.
The S&P/TSX composite index, which has been hit hard on the notion that a U.S. economic recession will curb demand for Canada's commodities, dropped 279.64 points or 2.14 per cent to 12,795.64. Materials, mining, metals and energy stocks had the sharpest declines, although no sector was immune.
The index officially entered correction mode on Wednesday, having lost around 12 per cent since its Oct. 31st high. It has dropped about 903 points in the last three sessions alone.
Growing pessimism about the prospects for the U.S. economy did most of the damage again, as investors reacted to a U.S. regional report that showed manufacturing activity slowed and comments from Fed head Ben Bernanke, warning that the risks of a U.S. downturn are mounting.
The Dow Jones industrial average tumbled to a 10-month low of 12,159.21, shedding 306.95 points or 2.46 per cent. The S&P 500 composite was off 39.95 points or 2.91 per cent while Nasdaq composite fell 47.69 points or 1.99 per cent.
According to Bloomberg, the U.S. indexes are nearing so-called bear markets levels - declines of at least 20 per cent from highs.
The selling picked up after the Federal Reserve Bank of Philadelphia reported its index of manufacturing activity in the region contracted sharply in January, falling to its lowest reading since October, 2001.
"This is bad," Ian Shepherdson, chief U.S. economist for High Frequency Economics, said of the report. "This is very alarming, because we had pinned our hopes on the relative strength of the corporate sector offsetting some of the housing hit."
Mr. Bernanke added to the gloom by telling Congress that the risks of a recession are increasingly pronounced and that the housing sector will act as a drag for most of 2008. Earlier in the day, a U.S. report showed construction of new homes in December fell to its slowest pace in 16 years.
Economists at Goldman Sachs said Thursday that Mr. Bernanke's comments, along with the extremely weak Fed manufacturing and other economic data, suggest the U.S. central bank will cut rates by 50 basis points at its next meeting.
Credit concerns also dogged Wall Street Thursday after rating agency Moody's Investors Service placed bond insurer Ambac Assurance Corp. on review for a possible downgrade.
With files from wires.
Copyright 2001 The Globe and Mail