An unprecedented credit rating downgrade of U.S. government debt by Standard and Poor's helped send the Toronto stock market tumbling about 400 points Monday.
The S&P/TSX Composite Index collapsed 491.21 points, or 4%, to end the day at 11,670.96
The Canadian dollar skidded 1.44 cents to 100.8 cents U.S.
The move Friday evening by the ratings agency has further bruised investor confidence that American and European leaders can stem worsening economic conditions and deal with a European government debt crisis.
The S&P move outweighed relief at a pledge by the European Central Bank to buy up Italian and Spanish bonds to help the two countries avoid devastating defaults.
Last week, worries over the two countries’ ability to keep tapping bond markets contributed to the turmoil in global markets, which saw around US$1.5 trillion wiped off share prices.
The energy sector fell as Suncor Energy fell $2.24 to $30.10 and Canadian Natural Resources fell $2.20 to $33.05.
September copper lost 16 cents to $3.96 U.S. a pound, pushing the mining sector down. Teck Resources gave back $3.81 to $37.81 while Lundin Mining dropped 92 cents to $4.41.
The financials sector also weighed on the TSX, with Royal Bank down $1.53 to $48.51 and Scotiabank lost $1.75 to $49.93.
Industrials were also down sharply with Canadian National Railways down $2.94 to $66.21 and Bombardier Inc. lost 31 cents to $4.90.
The gold sector was the only positive sector, as Barrick Gold Corp. rose $1.03 to $45.92 and Goldcorp Inc. climbed 94 cents to $46.31.
The miserable session on the Toronto market came after the main TSX index plunged almost 800 points or 6% last week. Monday's showing leaves the TSX down about 17% from the highs of the year reached in early March and off more than 11% year to date.
In earnings news, Silver Wheaton Corp. said its net earnings almost tripled in the second quarter, reaching a record $148.1 million U.S. Revenue more than doubled to a record $194.8 million U.S. and its shares lost 49 cents to $33.11.
ON BAYSTREET
The TSX Venture Exchange gave back another 129.20 points to 1,682.29 while the Nasdaq Canada index shed 30.02 points to 437.71
In Toronto, as mentioned, gold was the lone gainer among the 14 subgroups, advancing 1.6%.
The remaining subgroups went south, weighed by metals and mining, off 10.1%, while global base metals fell 9.1% and energy traveled 7.5% lower.
ON WALLSTREET
In New York, stocks plunged deep into the red on Monday as fearful investors faced the news that the United States had lost its coveted "AAA" credit rating.
All three major U.S. stock indexes were down between 4% and 5%, pushing the Dow below 11,000 for the first time since November.
The Dow Jones Industrials lost 634.76 points, or 5.6%, to 10,809.80
The S&P 500 dropped 79.92 points to 1,119.46. The Nasdaq Composite descended 174.72 points to 2,357.69
Few companies were spared. All members of the Dow 30 and 499 members of the S&P 500 traded lower. Newmont Mining was the lone winner on the S&P 500.
Bank of America plunged 20% -- the stock is down 35% during the past month. Alcoa fell 9%.
In other company news, Berkshire Hathaway joined the bidding pool for reinsurer Transatlantic Holdings, with an offer Friday. Transatlantic said they were given until Monday night to decide whether to accept Berkshire's offer. Shares of Transatlantic surged 5.4%.
The stock market has now lost 14% during the past two weeks.
Market observers tried to say the downgrade by itself shouldn't matter -- that it was expected and that the United States still has a strong credit rating.
But the market wasn't buying it.
"Investors are having one reaction to the downgrade: sell first and ask questions later," said one expert.
Even if investors dismissed the downgrade, they'd still have to contend with the European debt crisis and rising fears of a new U.S. recession.
Those are the factors that led to a drop of more than 6% last week, the worst since the financial crisis of 2008.
Economically speaking, Moody's Investors Service explained Monday why it was sticking with its triple-A bond rating and negative outlook for the United States -- setting itself apart from Standard & Poor's, which downgraded the U.S. last week.
Moody's said it expects the economy will improve, and that additional measures to reduce the budget deficit will be in place by 2013.
Prices on the 10-year Treasury note went sharply higher, lowering yields to 2.34% from Friday’s 2.56%. Prices and yields move in opposite directions.
Oil for September delivery dropped $5.72 to $80.95 U.S. a barrel
Gold futures for December delivery surged $61.40, or 3.7%, to top $1,713.20 U.S. an ounce as investors sought additional safe havens. The precious metal had hit a intra-day high of $1,723.40 U.S. an ounce earlier in the session.
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