Stock markets spent much of Tuesday backtracking, not taking too kindly to an announcement by U.S. Treasury Secretary Tim Geithner in connection with a multi-billion-dollar bailout package for the American economy.
The S&P TSX Composite Index ended a five-session win streak emphatically, losing 218.67 to 8,828.61, wiping out the main index’s gain in 2009, as financial and energy companies declined on concern the bailout will be insufficient to revive bank lending and bolster the economy.
New York markets were also seeing big losses as investors showed little reaction to the U.S. Senate's approval of its stimulus package.
Financials in Toronto were hit particularly hard. Manulife Financial Corp. slid 6.8% on concern that insurance companies will need to raise capital to cover investment losses. EnCana Corp. fell 5% as oil prices slid to a three-week low.
Manulife, Canada’s largest insurance company, slid $1.45 to $19.90, the most since Jan. 29. Sun Life Financial Inc., Canada’s third-largest insurer, fell 5.8% to $23.84.
Also weighing on Canadian insurers was a 31% plunge in New York of Principal Financial Group Inc., a U.S. insurer that reported $188.9 million in losses on corporate debt and mortgage securities. Separately, Fitch Ratings said that it may downgrade more than half of insurers worldwide this year on declines in the value of investments backing their policies.
Royal Bank of Canada, the nation’s biggest lender by assets, fell 4% to $30.54. Bank of Montreal, the fourth-largest, fell 4.9% to $30.21.
EnCana, Canada’s biggest oil and gas producer by market value, fell $2.88 to $54.98. Canadian Natural Resources Ltd., owner of the Horizon oilsands project in Alberta, dropped 6.3% to $44.36.
Barrick Gold Corp., the biggest gold producer, added 0.5% to $46.06. Goldcorp Inc. rose 1.8% to $36.73.
The Canadian dollar slumped nearly two whole cents to $80.24 cents U.S. as Bank of Canada Governor Mark Carney reiterated to a parliamentary committee that he expects the economy to rebound in 2010, growing by 3.8%. Many economists regard this as overly optimistic, but Carney said "such a recovery is actually more muted than usual," after what will be a difficult 2009.
BAYSTREET
Among the 13 TSX sub-groups, 11 tailed off. Metals and mining lost 8.5%, followed by energy stocks, down 4.3% and real estate, off 4%.
Gold stocks made up one of two groups in positive territory, moving ahead 1.4%, materials the only other gainer, up 0.6%.
The TSX Venture Exchange was also negative, only slightly less so, 0.20 points to 900.90, while the NASDAQ Canada index slid 19.89 points, to 556.13
ON WALLSTREET
The Dow Jones industrials index dropped without a parachute, 381.99 points in the red, to 7,888.88. The Standard & Poor’s 500 index stumbled 42.73 to 827.16. The NASDAQ composite index fell 66.83 to 1,524.73.
Geithner unveiled a financial-sector rescue that could mobilize more than $1 trillion U.S. in public and private support to get credit markets functioning normally again.
The new U.S. bank-rescue plan would expand an effort to unclog credit markets from $20 billion to $100 billion, according to administration officials, who say this would support $1 trillion in a Federal Reserve program announced in November but not yet initiated.
After much debate, the Senate passed its $838-billion economic stimulus bill Tuesday afternoon by 61 to 37. Now, leaders will need to negotiate a final bill with the House, which already approved an $819-billion version of the plan two weeks ago.
General Motors said Tuesday it's cutting 10,000 workers, or 14% of its salaried jobs, around the world. One-third of those jobs will be in the U.S. The automaker also said it will cut the pay for its remaining salaried workers.
UBS reported a $7-billion U.S. quarterly loss in the last three months of 2008, worse than expected, and also said it was cutting 2,000 jobs. Shares gained 10%.
Among stock movers, banks were hit hard, with Dow components American Express, Bank of America, Citigroup and JP Morgan Chase all sliding.
Aircraft maker and defence contractor Boeing Co. has lowered its previously reported fourth-quarter and 2008 results, citing lower values in its airliner financing portfolio and increased liabilities. Last month, Boeing reported a surprise fourth-quarter loss and announced plans to cut 10,000 jobs.
Treasury prices rose, lowering the yield on the benchmark 10-year note to 2.87% from 2.99% Monday.
U.S. light crude oil for March delivery dropped $2.01 to settle at $37.55 U.S. a barrel on the New York Mercantile Exchange.
COMEX gold for April delivery rose $21.40 to settle at $914.20 U.S. an ounce.
