The resource sector led the way to a steep decline on the Toronto stock market Wednesday afternoon as investors grew increasingly pessimistic about the potential economic consequences of a U.S. failure to raise its debt limit.
The S&P/TSX Composite Index fell sharply, letting go of 267.89 points, or 2%, to end the day at 13,032.67
The Canadian dollar handed back 0.59 cents to 105.37 cents U.S.
Oil prices backed off after the U.S. Energy Information Administration said oil inventories rose 2.3 million barrels last week, against a decline of one to two million barrels that analysts had expected. Gasoline inventories rose one million barrels.
Suncor Energy lost 94 cents to $38.26 and Canadian Natural Resources gave back $1.02 to $39.60.
Copper prices also weakened, giving back a chunk of Tuesday's seven-cent gain. The September contract in New York gave back three cents to $4.45 U.S. and the base metals sector lost quite a bit of ground. HudBay Minerals was down 53 cents to $13.32 while Teck Resources gave back $2.15 to $47.52.
Sherritt International Corp. shares were down 15 cents to $6.12 after the diversified mining company said its quarterly net income was $60.1 million or 20 cents per share, up 20% from a year ago but five cents below estimates. Revenue improved 23% to $500.6 million.
Financials weighed on the TSX as TD Bank shed $1.51 to $77.17 and Manulife Financial fell 40 cents to $15.20.
The tech sector was also lower with Research In Motion Ltd. down $1.43 to $24.43.
Hostile takeover target Zarlink Semiconductor said that its first-quarter profit dropped to $2.4 million U.S. from $10.3 million a year ago. Revenue slipped six per cent from the same time last year to $55.4 million. Zarlink is fending off an offer of $3.35 per share or $548.7-million U.S. from Microsemi Corp. and its shares added four cents to $3.65.
The gold sector also declined as Goldcorp Inc. was down $1.69 to $48.27 and Kinross Gold Corp. faded 46 cents to $15.88.
Canadian Pacific Railway Ltd. subsided 26 cents to $58.11 after it reported that spring flooding affected second-quarter results. However, conditions have since returned to normal. Net income fell to $128 million from $166.6 million a year ago while revenue increased slightly to $1.26 billion from $1.23 billion.
In other corporate news, Singapore-based private investment group Richard Chandler Corp. has increased its stake in stake in beleaguered Chinese forestry firm Sino-Forest to nearly 15%. The move pushed its battered shares up 55 cents to $7.67.
The company's shares plunged June 2 after a damning analyst report by Muddy Waters Research that raised questions about its financial reporting and operations.
ON BAYSTREET
The TSX Venture Exchange lost 37.74 points to 1,985.78, while the Nasdaq Canada index faded 22.73 points to 542.36
In Toronto, all 14 subgroups pointed downward. Information technology lost 2.8%, while materials lopped off 2.6%, as did metals and mining issues.
ON WALLSTREET
In New York, stocks retreated deep into negative territory on Wednesday as Congress remained stalled on raising the debt ceiling, and an economic report showed a significant slowdown in the U.S. manufacturing sector.
The Dow Jones Industrials faltered 198.75 points, or 1.6%, to 12,302.50
The S&P 500 dropped 27.05 points to 1,304.89. The Nasdaq Composite Index stumbled 75.17 points to 2,764.79
The Dow's manufacturing heavyweights -- 3M, United Technologies, General Electric and Caterpillar -- weighed heavily on the blue chips, following a disappointing durable goods report for June.
In the latest developments regarding the debt ceiling, House Speaker John Boehner said late Tuesday he will rewrite his debt ceiling legislation, after the Congressional Budget Office (CBO) said the bill would reduce deficits by only $851 billion U.S. over 10 years.
The CBO said Wednesday, a competing proposal from Senate Majority Leader Harry Reid would save $2.2 trillion U.S. over a decade -- less than the $2.7 trillion U.S. Reid said the bill would save.
The two competing proposals give investors little comfort that Congress is any closer to reaching an agreement, with only six days left before the Aug. 2 deadline.
Caterpillar shares were hit particularly hard, falling 3%. Competitors Deere and Cummins were down 3%.
The manufacturing sector has been one of the economy's bright spots amid a mediocre recovery, so the slowdown in durable goods spending gave investors cause for concern.
Dow industrials component Boeing reported earnings per share that blew away expectations, and raised its outlook for the rest of the year. The company made $1.25 U.S. per share, topping expectations of 98 cents U.S. a share. Shares gained 1%, making it the best performer on the Dow.
Dunkin Brands shares jumped 40% on Wednesday on its first day of trading after the company's initial public offering. The stock initially priced at $19 U.S. a share - above the price range of $16 to $18 U.S.
Amazon shares rose 4% after the company reported its profits fell to $191 million U.S. last quarter, or 41 cents U.S. a share. Despite the profit drop, the online retailer's results surpassed forecasts.
After the closing bell, credit card processing company Visa was to report its results.
Economically speaking, the U.S. Commerce Department reported that durable goods orders dropped 2.1% in June. Economists surveyed by Briefing.com expected an increase of 0.5%.
Elsewhere, the Federal Reserve said in its "Beige Book" that U.S. economic growth continued to slow across most of the country last month. The Beige Book is a collection of anecdotal observations about the economy by the Fed's 12 member regional banks.
Bond prices lost ground Wednesday, raising the yield on benchmark 10-year notes to 2.98% from Tuesday’s 2.95%. Bond prices and yields move in opposite directions.
Oil for August delivery lost $2.21 to $97.38 U.S. a barrel.
Gold futures for August delivery hit a new intraday trading record of $1,625.80 U.S. an ounce early Wednesday before retreating to $1,615.10 U.S. an ounce, down $1.70 from Tuesday's levels.
