North American stock markets remained solidly in the red Tuesday afternoon after a ratings agency downgraded Greece's debt to junk status.
The S&P/TSX Composite Index collapsed 134.23 points, or 1.1%, to end the day at 12,146.74
Ratings agency Standard & Poor's deprived Greece of an investment-grade rating on its bonds, meaning it would pay higher costs to borrow if it taps debt markets again.
German reluctance to fund the lion's share of a euro45-billion bailout of Greece by European governments and the International Monetary Fund is sending shudders through markets that the money may not reach Greece by May 19, when euro8.5 billion in bond payments come due.
The agency also lowered Portugal's debt rating Tuesday amid concerns about the country's ability to get a handle on its debt load. While Portugal has less debt, economists have focused on it as the next possible victim if concerns over high levels of government debt in Europe spread.
Among energy issues, shares in Suncor Energy Inc. lost 53 cents to $33.91.
The gold sector gained, while shares in Barrick Gold Corp. added 83 cents to $41.43
The base metals sector declined as the May copper contract plummeted 16.45 cents to $3.36 U.S. Shares in Teck Resources Ltd. fell $2.18 or 5% to $41.05.
In Canada, earnings season began in earnest after markets closed on Monday with Canadian National Railway Co. reporting a $511-million profit during its first quarter, due mainly to higher freight volumes, a higher fuel surcharge and increased freight rates. The results were offset in part by a stronger Canadian dollar.
Despite the better-than-expected results, CNR shares lost $1.51 or 2.4% to $62.21.
Energy producer Nexen Inc. also posted an improvement in its first quarter, saying it earned $185 million due to the rising price of oil. Investors seemed unimpressed, sending Nexen's shares down $1.08 or 4.1% to $25.42.
BlackBerry-maker Research In Motion unveiled a first look at its new smartphone operating system, set to debut next quarter, at its annual industry showcase in Orlando, Fla. It shares fell 28 cents to $72.59.
And Sherritt International Corp. stock slipped four cents to $7.99 after the resources company said it earned $59.7 million during the first quarter, a sharp contrast to the loss it experienced a year earlier.
In economic news, the Conference Board's index of consumer confidence dropped to 84.8 in April, erasing the gain recorded in March.
The Canadian dollar slid 1.53 cents to 98.34 cents U.S.
ON BAYSTREET
Of the 14 TSX subgroups, only gold’s 1.7% jump prevented a complete washout today. All other groups lost ground, most notably, metals and mining, off 3.9%, global base metals, sliding 3.6%, and industrials, trailing 1.8%.
The TSX Venture Exchange subsided 14.36 points to 1658.49, while the Nasdaq Canada index settled 16.42 points to 786.64
ON WALLSTREET
In New York, issues fell Tuesday after Standard & Poors cut Greece's debt rating to junk and lowered Portugal's debt rating, raising fears that a euro zone debt crisis could slow the global economic recovery.
The Dow Jones industrial average plummeted 213.04 points, or 1.9%, to 10,991.99, its biggest one-day plunge since last July.
The S&P 500 index faded 28.34 points to 1,183.71. The Nasdaq composite index gave back 51.48 points to 2,471.47.
Stocks were flat to lower in the morning as Goldman Sachs' sought to defend itself on Capitol Hill against allegations it profited from the housing market collapse. But news that ratings agency Standard & Poor's had cut Greece and Portugal's debt ratings overshadowed everything else, giving investors a reason to retreat on the back of an eight-week advance.
The Dow has ended higher for eight straight weeks, its best winning streak since January 2004.
The Nasdaq had also been on the rise for eight weeks, while the S&P 500 had risen for seven of the last eight weeks.
The Dow and S&P 500 were at 19-month highs, while the Nasdaq was at the highest point in nearly two years.
A better-than-expected reading on consumer confidence, a weaker-than-expected rise in a key measure of the housing market and anticipation at the start of the Federal Reserve's two-day policy setting meeting were all in play. Better-than-expected results from Texas Instruments, DuPont and 3M provided some support.
Stocks were barely higher Monday in a quiet session at the start of a busy week on Wall Street.
In addition to the housing and consumer confidence reports, a revised reading on first-quarter GDP growth is due later in the week, as well as quarterly results from roughly one-third of the companies in the S&P 500.
CEO Lloyd Blankfein and other executives from Goldman Sachs were answering lawmakers' questions as part of a Senate hearing on the role investment banks played in the financial market meltdown in 2008.
Blankfein, in prepared testimony, denied that the company sought to profit from the housing market collapse, an allegation lawmakers have made recently.
Fabrice Tourre, the trader charged in the Securities and Exchange Commission's fraud case against Goldman Sachs defended himself, saying he categorically denied the SEC's allegations.
Financials, energy and technology, the three biggest movers of the market in terms of sectors, all fell.
Goldman Sachs gained 1%, but other bank shares plunged, with the KBW Bank index losing over 3%. Sliding oil prices dragged on energy stocks, including Dow components Exxon Mobil and Chevron.
Declines were broad based, with 28 of 30 Dow components falling. In addition to the Dow's financial and energy components, other losers included heavily-weighted tech stocks Hewlett-Packard and IBM, aerospace and defense names Boeing and United Technologies and heavy-machinery maker Caterpillar.
Caterpillar shares rallied Monday after the company reported better-than-expected earnings and boosted its 2010 profit forecast.
Policymakers need to put a plan in place to get spending in line with revenue so as to close the unsustainable fiscal gap threatening the recovery, Federal Reserve Chairman Ben Bernanke said Tuesday.
Bernanke was speaking at the first meeting of President Obama's bipartisan debt commission.
On the economic front, investors are taking in reports on home prices and consumer confidence.
The Case-Shiller 20 city home price index rose 0.6% in February versus a year earlier, the first rise on an annual basis in three years. However, economists surveyed by Briefing.com were expecting a bigger gain of 1.1%. Prices fell 0.7% in January.
Consumer confidence surged in April, according to the Conference Board, whose index rose to 57.9 from 52.3 in March.
Treasury prices jumped, sharply lowering the yield on the 10-year note to 3.69% from Monday’s 3.82%. Treasury prices and yields move in opposite directions.
The price of a barrel of oil slipped $2.33 to $81.87 U.S.
Gold prices leaped $17 to $1,171 U.S. an ounce.
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