Stock markets were sharply lower Wednesday afternoon as prices for U.S. Treasury notes slumped and investors considered the increased likelihood that General Motors Corp. will end up filing for creditor protection.
Toronto's S&P/TSX composite index lost 143.74 points on the day to 10,142.16.
Bank of Montreal said higher amounts to cover credit losses helped cut profits by 44% to $358 million - but that still beat analyst expectations.
Its stock was down $1.71 to $42.00 after running up $2.15 on Tuesday.
The financial sector stepped back ahead of earnings reports from CIBC, Scotiabank and TD Bank Thursday while Royal Bank issues earnings on Friday. Shares in those banks were up at least 5% Tuesday in the wake of the BMO report.
But by Wednesday afternoon, those stocks were down over 2.7%.
Laurentian Bank of Canada reported Wednesday that quarterly earnings came in at $21.2 million, down from $25.1 million a year earlier, on flat revenue of $154.8 million. The Quebec-focused bank missed expectations by four cents a share and its shares were down $1.48 to $29.27.
Sun Life Financial and CI Investments Inc. are raising fees and limiting deposits in their lineup of segregated funds. Stock-market declines and low interest rates have squeezed the guarantees of segregated funds, which are similar to mutual funds but include insurance features such as death benefits and promises that investors will receive set amounts at maturity.
Sun Life shares lost $1.19 to $27.34 while CI gained 21 cents to $17.61.
The Toronto energy sector ran up, ahead of an OPEC meeting Thursday, before which Saudi Oil Minister Ali Naimi has said there is no need for OPEC to reduce production of oil.
Crude prices have bounded ahead since plunging to just over $30 U.S. a barrel four months ago. Naimi expects oil prices would likely reach around $75 U.S. a barrel by the end of the year on the back of growing Asian demand.
PetroCanada improved 75 cents $46.40 while Suncor Inc. advanced 54 cents to $37.16.
The gold sector stepped back, as Barrick Gold Corp. faded 93 cents to $40.26.
Timminco Ltd. has lost a contract to supply solar-cell-grade silicon and is refunding the customer's deposit with 3.6 million Timminco shares. Its shares fell 19 cents to $1.38.
Uranium One Inc. says it has requested a meeting with the new administration of Kazatomprom, a state-owned uranium mining company, after reports suggested the Toronto-based company's joint venture in Kazakhstan may be under investigation by authorities. Its shares tumbled $1.29 or 39.2% to $2.00.
The Canadian dollar subtracted 0.20 cents, to 89.32 cents U.S.
ON BAYSTREET
Of the 13 TSX subgroups, nine were negative. Financials trailed off 2.4%, followed by real-estate stocks, down 1.9% and consumer discretionaries, off 1.5%.
The four gainers were led by information technology, ahead 1.1%, energy stocks, gaining 0.5% and consumer staples, 0.3% to the good.
The TSX Venture Exchange was down 4.17 at 1,092.99 while the Nasdaq Canada Index added 5.92 points to 738.44.
ON WALLSTREET
The Dow Jones Industrials average plummeted 173.47 points, to end the day at 8.300.02.
The S&P 500 index slumped 17.27 points to 893.06, while the Nasdaq Composite Index lost 19.35 points, to 1,731.08.
Stocks had traded mixed for most of the session, with energy and technology shares posting modest gains, as concerns that GM will not be able to avoid bankruptcy overshadowed an encouraging housing report. But the selloff gained momentum after the yield on the benchmark 10-year bond jumped to a six-month high.
The selloff was broad based, with only two of the 30 Dow stocks closing in positive territory.
GM said bondholders had rejected its offer to exchange $27 billion U.S. in unsecured debt for 10% of the company's stock, ahead of a Monday deadline to complete a government-ordered restructuring that includes debt reduction, labour cost cuts and plant closures. Shares fell 19%, but analysts pointed out that the rejection didn't come as a shock.
Sales of existing homes increased 2.9% in April to 4.86 million homes sold, up from a downwardly revised pace of 4.55 million in March, according to the National Association of Realtors.
Economists polled by Briefing.com anticipated 4.65 million existing homes sold in the month. NAR also said the median home price fell 15.4% in April.
A report issued Tuesday showed that the drop in home prices deepened during the first three months of the year.
A survey released Wednesday showed that business economists expect the recession to end this year. Almost three out of four survey respondents expect the recession will end by the third quarter of 2009, the report said.
The FDIC said that the number of banks on its so-called "problem bank" list jumped to 305 during the first three months of the year, from 252 in the fourth quarter of last year. This is the highest level of troubled institutions since 1994.
Elsewhere, the Mortgage Bankers Association revealed that its market index of mortgage application volume fell 14.2% on a seasonally-adjusted basis for the week of May 22. The Market Composite Index was 786.0 compared to 915.9 in the previous week.
Shares of Bank of America rose 1% after the company said it was "well on its way" towards raising the nearly $34 billion U.S. in capital that government regulators said it needs to buffer against future loan losses.
Monsanto, the world's largest seed company, said it expects 2009 fiscal-year results to be at the low end of its earnings forecast. The company said stronger than expected competition in the herbicides business prompted the warning. Shares fell 6%.
Office supplies retailer Staples reported a one-third drop in quarterly profit to $147 million U.S., or 20 cents per share, but still managed to beat analyst expectations. Excluding restructuring expenses, Staples reported earnings of 22 cents U.S. per share, one cent ahead of analyst consensus from Thomson Reuters. The stock fell 1.7%.
Treasury prices fell, with the yield on the benchmark 10-year bond rising to 3.71% - its highest since mid November. It stood at 3.51% late Tuesday. Treasury prices and yields move in opposite directions.
Yields started moving higher shortly after the government announced the results of Wednesday's five-year auction.
The Treasury received $81.2 billion U.S. worth of bids for the $35 billion U.S. worth of five-year notes it offered Wednesday. It was the second of three auctions this week aimed at raising $101 billion U.S.
NYMEX oil for July delivery was rose $1 to settle at $63.45 U.S. a barrel.
COMEX gold for August delivery closed at $953.30 U.S. an ounce, unchanged from Tuesday.
