Stock markets racked up steep losses Tuesday as Barack Obama’s inauguration speech as U.S. president did nothing to calm concerns about worsening economic conditions and investors instead focused on the latest woes in the financial sector.
Banking sector woes helped send New York markets lower, while Canada’s central bank did its best to stop some of the bleeding on its side of the border.
Even so, the S&P/TSX composite index plummeted 349.50 points to 8,491.98
Tuesday, the Bank of Canada has chopped its key interest rate by another half percentage point to its lowest level ever, and warned that the Canadian economy will contract by 1.2% this year.
The central bank's target for the overnight lending rate now stands at 1%, even lower than in 1958, when the most-watched policy rate was 1.12%.
However, there was some good news in the statement, as the central bank said that economic growth should rebound, with GDP rising by 3.8% next year.
The Canadian dollar slid slightly, by .008 cents, following the rate cut announcement, ending the day at 78.93 cents U.S.
The loonie has been under intense pressure lately because of the deteriorating economy and a retreat in oil prices.
As if to underscore the central bank's comments on the economy, Statistics Canada announced that manufacturing sales decreased for a fourth consecutive month in November. The agency said that sales fell 6.4% to $48.4 billion, the lowest level since December 2004.
The slide was led by a 20.6% drop among petroleum and coal product manufacturers.
In separate announcements, Toronto-Dominion Bank and Bank of Montreal responded by announcing they have cut their prime lending rates by 50 basis points to 3%. BMO said it is cutting key mortgage rates by 30 to 50 basis points. Canadian Imperial Bank of Commerce and Royal Bank of Canada announced a few minutes later that they, too, have cut their prime rate to 3% from 3.5%.
Online brokerage TD Ameritrade said Tuesday its first-quarter profit dropped 23% and cut its outlook for the year because of America's economic problems. Shares in TD Bank, which has a 40% stake in the company, dipped 22 cents to $42.
The energy sector backed off as oil prices continued to retreat on the continued gloomy outlook for global energy demand and as traders sold the expiring benchmark contract due to a lack of space at a key U.S. storage facility.
A $215-million quarterly net loss at Suncor Energy Inc. marks the latest low point in the dramatic reversal of fortunes for an industry that just six months ago was struggling to find a home for a tidal wave of cash.
Challenges escalated in the fiscal fourth quarter of 2008 as the precipitous drop in commodity prices dragged Suncor into the red. The company reported a quarterly loss of $215 million or 24 cents a share, reversing year-earlier profits of $1 billion or $1.13 a share.
BAYSTREET
Of the 13 TSX sub-groups, energy weighed heaviest among the laggards, dropping 6.8%, while financials declined 5.9%, industrials were off 5.2%.
Gold was one of only two winners on the day, finishing 2.8% ahead. Materials made up the other, advancing 0.9%.
The TSX Venture Exchange moved down 16.27 to 856.68, while the NASDAQ Canada index shed 13.66 points to 497.61
WALLSTREET
The gaiety and giddiness up Pennsylvania Avenue had yet to make its presence felt on Wall Street, as New York's Dow Jones industrial average gave back 332.13 points Tuesday to 7,949.09
The NASDAQ composite index was off 88.47 points to 1,440.86, while the S&P 500 slipped 44.9 to 805.22
Financials were the heaviest weights on the blue-chip index. Shares of Bank of America Corp. dropped 29%, while Citigroup Inc. plummeted 20%. State Street Corp.was off 55%. PNC Financial Services Group fell 40%, and Bank of New York Mellon Corp lost 17%.
Markets were still feeling the aftershocks of yesterday's announcement from the Royal Bank of Scotland that it will likely post a US$41.3-billion loss for 2008 and that the British government will be bailing out banks for the second time in three months.
Investors fear the second government bailout might be a move to fully nationalize some British banks.
Last week, Bank of America Corp., JPMorgan Chase & Co. and Citigroup Inc. reported dismal fourth-quarter results, and provided a fairly muted outlook for 2009.
Citigroup also said it planned to split its operations in two in an effort to return to profitability.
An analyst at Friedman, Billings, Ramsey & Co. has cut his fourth-quarter estimate and price target for Wells Fargo & Co., citing concerns about rising credit costs.
The Financial Times is reporting that Bank of America will begin cutting as many as 4,000 jobs in its capital markets unit as it consolidates its operations in that division with those of recently acquired Merrill Lynch & Co.
U.S. light crude oil for February delivery rose $2.23 to settle at $38.74 a barrel on the New York Mercantile Exchange.
COMEX gold for February delivery rose $15.30 to settle at $855.20 an ounce.
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