The Toronto stock market moved deep into negative territory Friday afternoon as a fifth-straight month of job creation in Canada was overshadowed by an American employment report that widely missed expectations.
The S&P TSX Composite Index sank 242.26 points, or 2.1%, to close the week at 11,569.81.
Adding to the letdown were fresh worries about European government debt, this time centred around Hungary, which sent the Canadian dollar lower, the euro to a four-year-low below the key $1.20 U.S. mark and pushed investors to the safe haven zone of U.S. Treasuries.
Markets were already rattled before the release of the jobs data after a spokesman for Hungarian Prime Minister Viktor Orban was quoted as saying the nation's economy is in a "grave situation."
That sent the Hungarian forint down sharply and pushed the euro, to which it is linked, down to $1.1997 U.S.
The TSX financial sector was down, with Scotiabank off $1.85 to $49.33 and Royal Bank declined $1.26 to $53.51.
The stronger American dollar and demand worries pushed commodity prices, a key driver of the Toronto Stock Exchange, lower.
The TSX energy sector slipped, as Suncor Energy fell 84 cents to $32.45 and Canadian Natural Resources dropped $1.20 to $36.56.
The base metals sector lost as the July copper contract in New York fell 13 cents to $2.82 U.S. a pound. Teck Resources stepped back $2.32 to $32.80 while Quadra FNX Mining was 99 cents lower to $11.88.
Railroad stocks fell alongside commodity shares, taking the industrials sector down. Canadian National Railways declined $1.53 to $60.05 while Canadian Pacific Railway shed $1.52 to $58.10.
On the corporate front, units in RioCan Real Estate Trust drifted 44 cents lower to $18.62 as its chief executive said that the company is in a unique position to take advantage of opportunities in the real estate market as the economy recovers.
Edward Sonshine told the company’s annual meeting that the trust will take advantage of low interest rates and real estate prices that are down by as much as 25% in the U.S.
Western Coal Corp shares were down 26 cents to $4.82 after it said it will extend the life of its Willow Creek mine in northeastern British Columbia, due to an 88% increase in estimated coal reserves to 29.6 million tonnes.
In economic news, Statistics Canada said the country added 25,000 jobs in May, recording a fifth consecutive monthly increase. Economists were expecting 20,000 jobs creations in May. Meanwhile, the unemployment rate was unchanged at 8.1% in May, as against economists' expectations for 8%.
Meanwhile, building permits increased 5.4% to $6.7 billion in April, mainly on gains in the non-residential sector, Statistics Canada said Friday morning. This follows a 12.3% advance in March.
Consensus estimates were pointing to a decline of 2% in April. On a year-over-year basis, value of building permits jumped 48.2%.
The Canadian dollar dropped 1.81 cents to 94.23 cents U.S.
ON BAYSTREET
All 14 TSX subgroups remained in negative territory through the day. Metals and mining stocks were off 5.3%, followed by a 4.3% drop by global base metals, and a 2.5% drop for financial stocks.
The TSX Venture Exchange settled 17.30 points to 1,465.87, while the Nasdaq Canada index moved 24.09 points lower to 674.10.
ON WALLSTREET
In New York, stocks slumped Friday after a government report showed employers added fewer jobs than expected last month and the euro plunged to a new four-year low, reviving worries about the health of the European economy.
The Dow Jones industrial average plummeted 324.06 points, or 3.2%, to close at 9,931.22
The S&P 500 index subtracted 37.95 points to 1,064.88. The Nasdaq composite index slid 83.86 points to 2,219.17. The losses turned the major indexes lower for the holiday-shortened week.
The weaker-than-expected jobs report seemed to add to concerns that the problems with Europe's economy will cause the U.S. economy to experience a setback so soon after starting to recover from the recession.
Meanwhile, the euro plunged to a new four-year low after European Union member nation Hungary warned about its ballooning debt, with an official saying that the economy was in a "grave situation" and that the threat of default was "no exaggeration."
Hungary doesn't use the euro, but its woes affected the 16-nation shared currency on concerns that a broad European debt crisis is developing. Previously, the focus was mostly on Greece and the other PIIGS nations -- Portugal, Italy, Ireland and Spain.
All 30 Dow components fell, led by Chevron, Exxon Mobil, Boeing, IBM, 3M and United Technologies.
Stocks managed gains Thursday, putting the three major indexes in positive territory for the week. But those gains evaporated Friday, leaving stocks in danger of finishing the holiday-shortened week lower.
All three major indexes are down more than 10% off the rally highs hit in late April and are at risk of falling even further in the near term, although analysts are mixed on how deep the pullback is likely to be.
Wal-Mart Stores announced a new $15-billion U.S. share buyback plan Friday at its annual meeting for shareholders. Buyback plans are generally seen as positive for the company's stock price going forward as they represent a sign of corporate confidence.
BP shares continued to fall Friday in the aftermath of the massive oil leak, more than six weeks after its Deepwater Horizon rig exploded. Standard & Poor's cut its credit rating Friday after Fitch and Moody's, the other big ratings agencies, downgraded BP Thursday.
Efforts to plug the leak have been so far unsuccessful. While the company expects the flow to be capped by August, experts say there is a risk that it could drag on a lot longer.
Energy stocks slumped, including Dow components Exxon Mobil and Chevron.
On the economic front, employers added 431,000 jobs in May, 411,000 of which were temporary Census positions, the Labor Department said. Economists were expecting the government to report an increase of 500,000 jobs, according to a survey by Briefing.com.
Meanwhile, the unemployment rate dipped to 9.7% from 9.9% last month.
The monthly employment numbers are driving the way investors look at the U.S. economic recovery, according to some experts.
Treasury prices rallied, dropping the yield on the 10-year note to 3.20% from Thursday’s 3.38%. Treasury prices and yields move in opposite directions.
The price of a barrel of oil dropped $3.52 to $71.09 U.S.
Gold prices picked up $11 to $1,221 U.S. an ounce
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