The Toronto stock market endured a sharply lower open Wednesday amid growing worries about Spain's banking sector and an expected selloff of Research in Motion Ltd. shares at the open.
The S&P/TSX Composite Index tumbled 162.23 points, or 1.4%, to 11,447.07.
The BlackBerry maker announced after the close Tuesday that it expects to report an operating loss in the first quarter and plans on significant layoffs and other cost-cutting initiatives this year.
RIM also said it has hired J.P. Morgan Securities LLC and RBC Capital Markets to advise on its troubled business and financial performance as the company continues to give up market share to competitors such as Apple and devices using's Google's Android operating systems. RIM's shares plunged almost 10% in pre-market trading in New York.
On the corporate front, the House of Commons has passed legislation to end a week-long strike by 4,800 workers at Canadian Pacific Railway. It will now go to the Conservative-dominated Senate for Royal Assent.
In earnings news, clothing retailer Reitmans reported after the close that it had a $53,000-loss in its first quarter, which compared with a $624,000 profit a year earlier. Its sales dropped by 1% to $217.1 million and same-store sales, a key metric in the retail industry, declined 0.7%
On Thursday, investment firm Versant Partners trimmed the price target for Reitman's stock to $14, down $1 from the previous estimates. Reitmans (Canada) Ltd. closed Tuesday at $15.11 before the financial report was released.
The latest round of worry about the euro-zone has shifted to the Spanish banking sector in recent days especially after Bankia, the country’s fourth-largest lender, last week announced it needed €19 billion in state aid.
The concern is that Bankia’s woes might spread across Spain’s banking sector, which has suffered badly from the collapse of the construction sector.
Nervous investors sent Spain's borrowing costs higher with the 10-year government bond, a key indicator of market confidence in a country’s ability to pay down its debt, getting closer to the seven per cent level which is viewed as unsustainable.
On Wednesday, the interest rate or yield on Spanish 10-year bonds shot up 25 basis points to 6.67%, matching the level it hit at the height of the euro-zone crisis late last year. The yield later fell back to hit 6.66% in afternoon trading.
Earlier Wednesday, the government denied newspaper reports that the European Central Bank had rejected a Spanish idea to finance a bank bailout and it defended the country as sound.
The Financial Times reported Wednesday the E.C.B. rejected the idea of Spain paying for the €19-billion bailout of Bankia by using government bonds, which would then be used as collateral for cash from the E.C.B.
On the economic ledger, Statistics Canada said its Industrial Product Price Index for April was unchanged. Increases in chemical products of 1.7% and petroleum and coal products of 0.4% were offset by a decline in primary metal products, which were down 2.1%. Economists expected an increase of 0.1%, following a 0.2% rise in March.
The agency also said its Raw Materials Price Index fell 2.0%, largely because of declines in mineral fuels.
ON BAYSTREET
The TSX Venture Exchange fell 14.01 points to 1,295.33. The Nasdaq Canada index declined 13.05 points to 353.26.
All 14 Toronto subgroups lost ground at the outset, weighed mostly by energy issues, off 2.9%, metals and mining, down 2.6%, and global base metals, down 2.4%.
ON WALLSTREET
Stocks opened sharply lower Wednesday as worries about Europe's debt, specifically the Spanish banking system, are again shaking confidence.
The Dow Jones Industrials took a pasting of 139.11 points, or 1.1%, to begin Wednesday at 12,441.58
The S&P 500 tailed off 16.36 points to 1,316.06. The tech-rich Nasdaq Composite Index deducted 36.33 points to 2,834.66.
Shares of BlackBerry-maker Research in Motion tumbled 8% on news it hired JPMorgan and RBC Capital to review its strategic options, which is generally a signal it is putting itself up for sale. The company also warned it now expects an operating loss for its fiscal first quarter, which ends on June 2.
Shares of auto parts retailer Pep Boys plunged after the company announced that its previously announced purchase by The Gores Group has been called off.
Seed and herbicide maker Monsanto raised its full year earnings guidance to between $3.65 to $3.70 U.S. a share, up from the $2.96 U.S. a share it earned a year ago and above the most bullish forecasts of analysts surveyed by Thomson Reuters. The stock rose nearly 3%.
Shares of troubled natural gas producer Chesapeake Energy fell 3% in early trading. Reuters reported late Tuesday that the company was preparing to meet with many of its major lenders later this week in an effort to raise the $9 billion to $10 billion U.S. needed to close a funding shortfall. The report cited people familiar with the matter.
DVR maker TiVo and movie studio Lions Gate Entertainment, which has enjoyed a hit with the movie "The Hunger Games" will report results after the close.
Economically speaking, pending home sales for April are expected to have increased by 0.6%, according to a survey of analysts by Briefing.com, after rising 4.1% the month prior.
Due later this week is the May jobs report, as well as key readings on manufacturing and auto sales. Economists forecast that employers added 150,000 jobs in May, and that unemployment remained at 8.1%.
The price on the benchmark 10-year U.S. Treasury rocketed up, pushing the yield down to 1.65% from 1.73% late Tuesday. Treasury prices and yields move in opposite directions.
The price of a barrel of oil slipped $2.20 to $88.56 U.S.
Gold futures for June delivery fell $1.20 to $1,547.50 U.S. an ounce.
