Stocks plummet again

Stocks plummet again

STEVE LADURANTAYE
Wednesday, October 15, 2008

Investors abandoned any hopes of a quick recovery to the credit crisis Wednesday, driving North American markets lower on economic data that suggested massive government intervention may not be enough to prevent a recession.

The Dow Jones industrial average closed the day 7.9 per cent lower, or 733.08 points, to 8,577.91, while the broader S&P 500 was down 9 per cent, or 90.23 points, to 907.78. The S&P/TSX closed 6.4 per cent lower, or 631.83 points, to 9,312.83, after gaining 9.8 per cent Tuesday.

“Any euphoria over the notion that government actions are finally attacking the root problems of the crisis is rapidly dissipating as economic data turns south,” UBS wrote in a note to clients. “Systemic problems require systemic solutions which do not lend themselves to rapid resolution.”

September retail sales in the United States posted their biggest monthly drop in more than three years, down 1.2 per cent, compared to the 0.7 per cent decline economists had predicted. Consumer spending accounts for two-thirds of economic activity in the United States.

“The details of this report were simply disturbing,” said Millan Mulraine, an economics strategist at TD Securities. “On the whole, the strains on U.S. consumers are beginning to show, and this report is yet another indication that consumers are beginning to retrench their spending as they navigate against the headwinds coming from a weak domestic economy, tight credit conditions (despite the dramatic easing in monetary policy) and a deteriorating job market.”

Toronto was under pressure to hold onto some of Tuesday's gains, with oil falling $4.09 (U.S.) to $74.54 on expectations of weaker demand as the economy slows. Oil is trading at its lowest level since September, 2007. The energy sector fell 12.3 per cent, while the mining sector fell 9.9 per cent. Only the consumer staples sector posted a gain, up 1.6 per cent as Saputo Inc. gained 5 per cent and George Weston Ltd. gained 5.05 per cent.

© Copyright The Globe and Mail