Investors got another look at what happens to a commodity-heavy stock market index when commodities suddenly fall out of favour:
The S&P/TSX composite index closed at 13,712.8, down 297.59 points or 2.1 per cent - a rough way to begin the first full week of the third quarter.Now, the index is down 0.9 per cent in 2008, putting it under water with the rest of the world's major stock market indexes for the first time since April. But you can't blame the economy on this turn. Instead, it appears to have more to do with a quick retreat from everything from corn to oil:
The Reuters/Jefferies CRB commodity index fell 2.8 per cent, its biggest dip since mid-March with 17 of the index's 19 commodities falling.To be fair, commodity producers weren't the only drags on the S&P/TSX commodity index. Nine of the 10 subindexes were down, as were 82 per cent of the 253 stocks in the broader index.
Financials were mixed, with Royal Bank of Canada rising 1.3 per cent and Canadian Imperial Bank of Commerce falling 2.8 per cent.But energy producers took the biggest hit, falling 2.8 per cent, after the price of crude oil tumbled to $141.37 (U.S.) a barrel in New York, down $3.92. The price briefly dipped below $140. EnCana Corp. fell 4.8 per cent and Canadian Natural Resources Ltd. fell 3.6 per cent.In the United States, the Dow Jones industrial average closed at 11,231.96, down 56.58 points, or 0.5 per cent.
The broader S&P 500 closed at 1252.31, down 10.59, or 0.8 per cent - its lowest close in nearly two years and 20 per cent below its October high, the definition of a bear market.Although energy stocks also took a hit, tumbling 2.3 per cent, the biggest drag were the financials, which fell 3.2 per cent.
Freddie Mac and Fannie Mae fell 17.9 per cent and 16.2 per cent, respectively, on a report from Lehman Brothers that the two troubled mortgage finance companies may have to raise a combined $75-billion - a prospect that soured views on the rest of the sector. Citigroup Inc. fell 2.5 per cent and Bank of America Corp. fell 3.9 per cent.Copyright 2001 The Globe and Mail