Losses accelerated on the Toronto stock market Friday afternoon as investors looked back at a volatile month and adjusted expectations for economic growth amid more unsettling news from Europe.
The S&P/TSX composite index dropped 77.68 points to 11,671.44
What started as concern over whether Greece could control its unsustainably high deficit has grown to worry about whether the euro currency itself can survive as countries mainly in southern Europe slash spending to lower debt.
Those worries grew Friday after ratings agency Fitch downgraded Spain’s credit rating for the second time in a month. Fitch said the country’s plan to cut its budget will likely slow economic growth.
As May draws to a close, the Toronto market’s main index is down more than 5% from its 2010 highs from April 26, while the Dow Jones industrials average has fallen almost 10%.
The base metals sector was down, with July copper five cents lower at $3.16 U.S. a pound. Teck Resources declined $1.49 to $35.30 and HudBay Minerals was down 42 cents to $11.76.
The financial sector declined after the group hobbled the TSX Thursday by earnings reports from Royal Bank, CIBC and TD Bank which missed analyst expectations, even as the trio reported sharply higher profits from a year ago.
On Friday, Royal Bank dropped $1.48 to $55.37.
After the market close, National Bank said it earned $261 million, up $20 million from a year ago. The bank’s profit amounted to $1.50 per diluted share. The average analyst estimate had been for earnings of $1.46 per diluted share, according to Thomson Reuters. Return on equity was 18%, down from 18.5% a year ago and its shares gave up an early gain to lose 42 cents to $57.65.
The TSX energy sector fell as Suncor Energy lost 48 cents to $31.89 and Imperial Oil fell $1.04 to $39.85.
The sector failed to find lift from moves by Western Canadian provincial governments offering fresh incentives for the energy industry.
The Alberta government announced a new royalty incentive program Thursday aimed at encouraging energy companies to drill technically challenging wells in the province. Under the new rules, shale gas, coalbed methane and horizontal oil and gas wells drilled as of May 1 will pay a maximum 5% royalty rate.
And in Saskatchewan, the government has announced a royalty break that it hopes will stimulate production from a particular type of natural gas well. For the next three years, the province will not charge any royalties on the first 25 million cubic metres of gas produced from horizontally drilled wells.
Among gold issues, Kinross Gold Corp. lost 23 cents to $17.97.
In other corporate news, shares of Theratechnologies charged ahead $1.85 or 64% to $4.75 after the company announced a step towards U.S. regulatory approval for marketing its tesamorelin drug.
The company said Thursday that a U.S. Food and Drug Administration committee voted that the drug, used to treat excess abdominal fat in HIV patients with lipodystrophy, should be granted marketing approval by the FDA.
Zarlink Semiconductor earned $6.8 million U.S. for the quarter ended March 26 compared with a loss of $50 million U.S. a year ago. Its shares ran ahead 16 cents or 10.2% to $1.73.
Garda World Security Corp. reported first-quarter profit of $6.3 million, an increase from $2.5 million a year ago. Revenues slipped to $272.3 million from $279.2 million but its shares jumped 65 cents to $8.37.
In economic news, Statistics Canada said the deficit on current transaction with rest of the world narrowed to $7.8 billion in the first quarter, on a seasonally-adjusted basis. This was down from a current account deficit of $10.2 billion in the previous quarter. Economists were expecting a deficit of $9 billion.
The Canadian dollar tailed off 0.50 cents to 94.81 cents U.S., as the loonie, the euro and other currencies slipped after the Fitch downgrade.
ON BAYSTREET
All but two of the 14 TSX subgroups ended downward Friday. Metals and mining and global base metals tied for the heaviest losses at 2.1% each, while financials slid 1.4%.
The two gainers were health-care, 1.1% stronger, and energy, 0.1% more energetic.
The TSX Venture Exchange inched ahead 0.60 points to 1,503.44, while the Nasdaq Canada index moved 8.54 points lower to 690.77
ON WALLSTREET
In New York, stocks cut losses but finished in the red Friday, ending a dismal month that saw the Dow Jones industrials suffer their worst May in 70 years, after a downgrade of Spain's debt reminded investors that Europe's economic woes continue.
The Dow Jones industrial average stumbled 122.36 points, or 1.2%, to finish the week and month at 10,136.63. Markets are closed Monday for Memorial Day.
The S&P 500 index lost 13.65 points to 1,089.41. The Nasdaq composite index dipped 20.64 points to 2,257.04.
Stocks were already weak before the ratings agency cut Spain's debt one notch. While the cut still leaves the debt in investment grade territory, as opposed to junk, it nonetheless managed to rattle investors in a thinly-traded session.
Friday marked the end of a rough month on Wall Street in which stocks plunged on worries about the European debt crisis, the weak euro and bets that the market advance had outpaced any economic recovery.
The Dow lost 7.9%, according to early tallies, seeing its worst month since February 2009, when it fell 11.7%, and worst May since 1940, when it plunged 21.7%.
The Nasdaq lost 8.3%, its worst month since November 2008, when it dropped 10.8%, and its worst May since 2000, when it skidded 11.9%.
The S&P 500 declined 8.2%, its worst month since February 2009, when there was an 11% loss, and its worst May since 1962, when the drop was 8.6%.
Stocks rallied Thursday after China said it will stay invested in European debt. The Dow jumped 285 points, or almost 3%, and the S&P 500 and Nasdaq both gained more than 3%.
After such an advance, investors pleaded exhaustion Friday, with trading pretty quiet as many market pros stepped out ahead of the long weekend.
Stock declines were broad-based, with 27 of 30 Dow components falling, led by Caterpillar, Chevron, Exxon Mobil, Hewlett-Packard, IBM, 3M, Johnson & Johnson.
The CBOE Volatility index, or the VIX, Wall Street's fear factor, rallied 9% in afternoon trading.
Economically speaking, an early-morning report from the Commerce Department showed consumer income picked up last month, but spending didn't follow suit.
Personal income rose 0.4% in April, in line with estimates and matching the gain in March.
Personal spending was flat after rising 0.6% in the previous month. Spending was expected to grow by 0.3%.
The Core PCE, the report's inflation component, rose 0.1%, in line with estimates, after increasing 0.1% in March.
The May consumer sentiment index from the University of Michigan rose to 73.6 from 73.3 last month. Economists expected it to ease to 73.2.
The Chicago PMI, a regional reading on manufacturing, fell to 59.7 in May from 63.8 in April, versus forecasts for a drop to 60.
Treasury prices inched up, lowering the yield on the 10-year note to 3.30% from 3.34% Thursday. Treasury prices and yields move in opposite directions.
The price of a barrel of oil eased 46 cents to $74.09 U.S.
Gold prices inched up two dollars to $1,216 U.S. an ounce
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