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The close: 2009 in the red

Monday, January 12, 2009

Just a week ago, investors might have been contemplating how high Canada's S[amp]amp;P/TSX composite index could rise after bouncing about 24 per cent from its low in November and posting impressive gains at the start of 2009. Now, they're back to contemplating how low the index can go.

On Monday, the S[amp]amp;P/TSX composite index closed at 8793.33, down 291.85 or 3.2 per cent. For the year, it is now down 2.2 per cent – the first time in 2009 that it has closed at a loss – but is still about 15 per cent above its November low.

Commodity producers were big casualties. Energy stocks fell after the price of crude oil meandered below the $40 (U.S.) a barrel threshold, this time falling to $37.59 a barrel, down $3.24. Suncor Energy Inc. fell 4.8 per cent and Canadian Oil Sands Trust fell 5.4 per cent.

Gold also fell, to $821 an ounce, down $34, which of course hammered gold producers. Barrick Gold Corp. fell 3.1 per cent and Kinross Gold Corp. fell 3.5 per cent. To cap things off, fertilizer companies also had a bad day, with Potash Corp. of Saskatchewan Inc. falling 11.1 per cent.

But this was not just a commodities story. It didn't help that the Bank of Canada's Business Outlook Survey for the fourth quarter, released on Monday, pointed to deteriorating economic conditions: The survey of senior managers suggested a decline in sales, capital spending and hiring among Canadian companies.

This seems to have frightened investors out of just about everything, including banks, after sentiment in the United States again turned sour on financials. Bank of Nova Scotia fell 5.2 per cent and Toronto-Dominion Bank fell 2.5 per cent.

In the United States, the day's losses were less severe, though still ugly. The Dow Jones industrial average closed at 8474.05, down 125.13 points or 1.5 per cent. The broader S[amp]amp;P 500 closed at 870.26, down 20.09 points or 2.3 per cent.

Financials were whacked, with Citigroup Inc. falling 17 per cent after reports that it could sell a controlling stake in its brokerage unit to Morgan Stanley. Bank of America Corp. fell 12 per cent on a report that its dividend could be slashed dramatically.

Alcoa Inc. fell 6.9 per cent before releasing its fourth quarter results – the first in the Dow to do so – after markets closed. The aluminum producer announced a loss of nearly $1.2-billion, or $1.49 a share, far worse than analysts had expected. Sales fell 19 per cent from last year.

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