The Toronto stock market registered a triple-digit decline for a second session on Tuesday despite American and Chinese data showing growth in the manufacturing sector.
The S&P TSX Composite index plummeted 175.04 points, or 1.6%, to end Tuesday at 10,693.17.
The TSX is still up an impressive 43% since the lows of early March, but investors have already priced in an economic recovery and there are concerns over what could drive the six-month old stock rally higher.
Among the big banks, CIBC backed off $3.15 to $61.10 while Royal Bank slipped 97 cents to $55.48.
The TSX energy sector was down as oil prices gave up early gains. EnCana Corp. declined $1.37 to $55.69.
Elsewhere, Research In Motion Ltd. was supportive, up $1.19 to $81.54 after the BlackBerry maker's stock was upgraded to outperform from neutral at Credit Suisse.
Metal prices were mixed as December copper declined 0.8 of a cent to $2.8185 U.S. a pound following the release of the Chinese data.
The base metals sector was down with Teck Resources down 99 cents to $25.43 while the gold sector lost strength.
Industrial stocks also weighed on the TSX with Bombardier Inc. down 22 cents to $3.78.
Shares in Lakeside Steel Inc. jumped three cents or 15.8% to 22 cents after the Federal Court granted the company intervener status in a case addressing whether U.S. Steel Corp. broke promises made to the federal government when it took over the former Stelco in 2006. Lakeside will argue that U.S. Steel's Canadian assets should be sold and has described itself as "a ready, willing and able potential purchaser."
Biovail Corp. shares lost 34 cents to $13.65 after it said it is "disappointed" with the results from a clinical trial of a potential drug for patients with Parkinson's disease psychosis.
The Toronto-area pharmaceutical company said Tuesday a Phase 3 trial didn't find statistically significant improvements for patients who were given pimavanserin, compared with patients who didn't receive the treatment.
No major economic data came out of Canada on Tuesday.
The Canadian dollar was off 0.85 cents, to 90.52 cents U.S. Losses in the currency picked up after Liberal leader Michael Ignatieff said the party will no longer prop up the minority Conservative government of Prime Minister Stephen Harper.
Liberal MP Bob Rae later said the party will present a motion of non-confidence at the first opportunity, which will come the first week of October.
ON BAYSTREET
All but one of the 14 TSX subgroups went south Tuesday, weighed by financials, 3.1% poorer, industrials, down 2.4% and global base metals, off 1.9%.
Only information technology saw daylight, ahead 0.7%.
The TSX Venture Exchange skidded 13.90 points to 1,161.34, while the Nasdaq index lost 0.94 points to 726.58.
ON WALLSTREET
In New York, equity markets tumbled Tuesday, as investors took a big step back at the start of what is typically a rough month, betting that stocks have risen too far too fast without any underlying support.
The Dow Jones Industrials fell 185.68 points, or nearly 2%, to 9,310.60. The S&P 500 index faded 22.58 points to 998.04. The tech-rich Nasdaq composite index plunged 40.17 points to 1,968.89.
Experts said said that investors were also reacting to the "calendar influence," amid a variety of reports about the tendency for September to be a weak month on Wall Street.
September is typically the biggest percentage loser of the year for the Dow, S&P 500 and Nasdaq composite, according to the Stock Trader's Almanac.
Stocks have essentially been on the rise since March, as investors have welcomed extraordinary fiscal and monetary stimulus and signs that corporate profits and the economy have stabilized.
The major gauges ended last week at the highest levels in nine to 10 months. Financial shares took a beating Tuesday after enjoying a nice ride through the late summer, fueled largely by speculation and momentum.
But with the S&P up 52% from the March 9 lows, market participants are now looking for concrete evidence that the economy is recovering. The morning's reports were positive, but perhaps not as positive as the most optimistic forecasts.
On the economic front, the Institute for Supply Management's manufacturing index for August showed growth in the sector for the first time since January 2008. The index rose to 52.9 from 48.9 previously. Economists surveyed by Briefing.com thought it would rise to 50.5.
Pending home sales rose for the sixth straight month, jumping 3.2% in July, to the highest point in nearly two years, according to a report from the National Association of Realtors released Tuesday morning. The index rose 3.6% in June. Economists surveyed by Briefing.com thought sales would rise 1.5% in July.
Construction spending fell 0.2% in July versus forecasts for an unchanged reading. Spending rose a revised 0.1% in June.
Many of the summer's big bank sector winners led the declines Tuesday.
Dow component Bank of America slipped 5% in active NYSE trading. BofA was the biggest Dow gainer in the June through August period, rising 56%.
Fellow Dow component American Express lost 4% Tuesday. Over the last three months, AmEx has gained 36% and was the second-best Dow performer.
Dow component JPMorgan Chase lost 3% after rising 17% this summer.
Among other movers, Citigroup lost 6% after rising 34% in the summer. Regional bank Fifth Third Bancorp lost 5% after rising 59% this summer.
The decline in oil prices dragged on heavily-weighted energy stocks including Dow components Chevron and Exxon Mobil
The government's popular "Cash for Clunkers" program gave a boost to sales in August, major automakers said, although a plunge in sales in the last week of the month, following the program's end, suggests the impact will not be far-reaching.
In August, Ford Motor reported that sales jumped 17% versus a year ago, its best monthly gain in four years. However, the advance was short of expectations for a rise of 22%, according to analysts surveyed by Edmunds.com.
Toyota, which had the most Clunker sales of any automaker, said August sales rose 6%, its first year-over-year gain in 16 months.
General Motors and Chrysler Group both reported year-over-year declines in August on sales that improved from July.
Online auctioneer eBay said it will sell a large stake in its Skype Internet phone business to a group of investors for $2.75 billion U.S.
Treasury prices went sharply up, lowering the yield on the benchmark 10-year note to 3.37% from Monday’s 3.40%. Treasury prices and yields move in opposite directions.
The price of a barrel of oil subtracted $1.91 to $68.20 U.S.
Gold prices gained $3 to $957 U.S. an ounce.
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