Party's over
RTGAM
U.S. stocks were walloped on Wednesday, and the reason wasn't entirely clear. There was certainly another round of bad news for the economy, this time in the form of rising unemployment in the latest ADP survey.
More likely, though, the market simply freaked out over the strong gains of the past several days that had sent major North American indexes up about 18 per cent from their lows in late October.
Either way, the sharp decline came as a clear reminder of the economic challenges Barack Obama highlighted in his presidential acceptance speech on Tuesday night.
The Dow Jones industrial average closed at 9139.27, down 486.01 points or 5.1 per cent. All 30 stocks fell. The broader S&P 500 closed at 952.77, down 52.98 points or 5.3 per cent. There, 97 per cent of stocks fell - contributing to a remarkable pattern in recent trading, where the vast majority of stocks move in the same direction.
Financials were particularly hard hit, with Citigroup Inc. falling 14 per cent and Bank of America Corp. falling 11.3 per cent - illustrating that the financial crisis may have left the front pages but has not yet finished messing with stocks.
Typical defensive stocks were also whacked. Merck & Co. Inc. fell 7.7 per cent, Johnson & Johnson fell 3.3 per cent and Kraft Foods Inc. fell 4.2 per cent. Indeed, on days like this, nothing looks defensive. One of the best-performing stocks on the Dow was General Motors Inc., which fell 2.8 per cent.
In Canada, the S&P/TSX composite index closed at 9887.2, down 229.38 points or 2.3 per cent - a milder sell-off thanks in part to a rally among gold producers. Goldcorp Inc. rose 6.2 per cent and Barrick Gold Corp. rose 1.4 per cent, even though the price of gold slipped nearly $12 (U.S.) an ounce to $742.40.
Still, the losses were widespread and fairly steep. Among financials, Royal Bank of Canada fell 1.9 per cent and Bank of Montreal fell 4.4 per cent. Among energy stocks - which reacted to a slide in oil to $65.30 a barrel, down $5.23 - Suncor Energy Inc. fell 3.3 per cent and EnCana Corp. fell 0.8 per cent.
Copyright 2001 The Globe and Mail