The Toronto stock market slid almost 200 points mid-afternoon Tuesday, with commodity stocks bearing the brunt of the selloff as aluminum giant Alcoa Inc. delivered disappointing earnings and China moved to cool off a hot economy.
The S&P/TSX Composite Index ended the day down 126.95 points, or 1.1% to 11,820.18.
The Alcoa earnings raised worries that the economic recovery will be slower than expected while the Chinese action to curtail economic growth put pressure on commodity prices because of concerns about a possible slowing of demand.
Commodity prices fell after the People's Bank of China increased the interest rate on its one-year bill by eight basis points to 1.84%.
The rise was the second undertaken in the interbank markets in a week and provided a further hint that more substantial interest rate increases could be in the offing as China's economic growth accelerates.
With plenty of money sloshing around, soaring real estate prices in Beijing, Shanghai and other major cities have reawakened fears that asset bubbles and inflation could set the Chinese economy spinning.
China also raised the ratio of reserves banks must hold by 0.5 percentage points, reflecting concerns over a possible rise in inflation this year as the country's economy rebounds.
The base metals sector was the biggest decliner in Toronto, as March copper lost nine cents to $3.35 U.S. a pound. Teck Resources stepped back $1.09 to $41.11 and HudBay Minerals fell 43 cents to $14.43.
Shares in Grande Cache Coal Corp. were down 71 cents to $6.07 after the company raised its 2010 production target to a range of between 1.6 million and 1.8 million tonnes of metallurgical coal, about 6% higher than its previous guidance.
The TSX energy sector lost ground, as Suncor Inc. moved down 71 cents to $37.87, while Canadian Natural Resources dropped 90 cents to $73.58.
Among gold issues, Barrick Gold Corp. faded $1.08 to $41.92 and Goldcorp Inc. backed off $1.31 to $42.54.
Blue chips also joined in the selloff, with the financial sector down. CIBC lost 55 cents to $66.02 while Scotiabank fell 54 cents to $46.46.
Railway stocks pushed the industrial sector down, with Canadian National Railways off 70 cents to $57.68 and Canadian Pacific Railways fell 23 cents to $56.70.
In other corporate news, Canada Bread Company Ltd. said it plans to close three Toronto bakeries over the next three years and move their production to a new plant somewhere in southwestern Ontario.
The company says employees will have an opportunity to apply for the 300 positions at the new bakery. Its shares were unchanged at $55.
Video game publisher Electronic Arts Inc. did not see a rebound in sales during the most recent quarter. It slashed its full-year earnings forecast after the markets closed Monday, saying ongoing weakness in game sales didn't improve over the holidays.
In economics news, Statistics Canada said today that the country's merchandise exports jumped 1.1%, while imports rose 3.9% in November. This had pushed the nation's deficit to $344 million in November from a surplus of $503 million in the earlier month.
In another report, it said home prices rose 0.4% in November, indicating growth in the housing market.
The Canadian dollar gave back 0.58 cents to 96.18 cents U.S.
ON BAYSTREET
All but one of the 14 TSX subgroups were lower on the day. Metals and mining stocks unraveled 3.5%, followed by global base metals, off 3.3%, while gold lost 3%.
Only telecoms survived with dignity, gaining 0.4%.
The TSX Venture Exchange fell 31.77 to 1,576.76, while the Nasdaq Canada slid 15.18 points to 707.79.
ON WALLSTREET
In New York, issues fell Tuesday in a broad-based selloff, after Alcoa's worse-than-expected profit report and Chevron's profit warning unnerved investors at the start of the quarterly profit reporting period.
The Dow Jones Industrials lost 36.73 points to 10,627.26. The S&P 500 subtracted 10.77 points to 1,136.21, and the Nasdaq took off 30.10 points to 2,282.31.
One expert said that investors were not just reacting to Alcoa's miss, but also to the recent ho-hum economic news and all the focus on the bank sector this week.
Disappointing profit news from Alcoa and Chevron, two big Dow components, was unnerving at the start of a quarterly reporting period that is expected to bring strong growth.
The reports follow last week's weaker-than-expected December payrolls report, which raised worries about growth in the fourth quarter.
At the same time, the financial sector is under pressure as the FDIC, the top banking regulator, considers requiring lenders to pay if they tie compensation to risky practices. Meanwhile, the White House is debating taxing companies that took bailout funds to make sure they pay back the money.
Alcoa, a Dow component, reported a profit of one cent per share late Monday, versus a loss of 28
cents U.S. per share a year ago. Analysts expected the company to have earned six cents U.S. a share, according to earnings tracker Thomson Reuters. Revenue fell less than expected.
Alcoa shares slumped 11% Monday.
Chevron warned late Monday that sharply lower fourth-quarter refining earnings would drag down its fourth-quarter results. Margins have been pressured because the rising price of oil is not in sync with the weaker demand globally, due to the economic slowdown.
Chevron shares fell 1% and pressured fellow Dow oil component Exxon Mobil.
Other big Dow losers included Bank of America, JPMorgan Chase, United Technologies, Hewlett-Packard and Caterpillar.
KB Home reported a quarterly profit for the first time in two years, thanks to a tax benefit.
However, the homebuilder's revenue dropped from a year ago.
Intel and JPMorgan Chase are the biggest companies due to report results this week.
S&P 500 earnings are expected to have risen around 213% from a year ago, according to earnings tracker Thomson Reuters. However, that figure reflects the easy comparisons versus a year ago, the worst quarter in Thomson's history.
The massive turnaround in the financial sector is playing a big role in the earnings recovery, with the sector expected to post a big profit after posting a loss a year ago.
That the sector that helped exacerbate the recession is now profiting a year later is a major source of frustration for many investors, especially since taxpayers helped fund the bailouts.
The November trade deficit, released in the morning, widened to $36.4 billion from a revised $33.2 billion U.S. in October. The deficit was expected to widen to $34.5 billion U.S., according to a consensus of economists surveyed by Briefing.com.
The Federal Reserve made record profits in 2009, returning about $45 billion to the U.S. Treasury.
Treasury prices rose, lowering the yield on the 10-year note to 3.71% from Monday’s 3.83%. Treasury prices and yields move in opposite directions.
The price of a barrel of oil dropped $1.99 to $80.53 U.S.
Gold prices slid $22 to $1,129 U.S.
