Commodities continue to hammer North American stocks on Tuesday in late-morning trading, sending Canada's commodity-heavy benchmark index to its second triple-digit decline this week.
The S&P/TSX composite index was down 235 points or 1.7 per cent, to 13,762 - bringing the two-day damage to about 450 points. Although less exposed to commodities, major U.S. indexes were also suffering. The Dow Jones industrial average was down 141 points or 1.1 per cent, to 12,240. The broader S&P 500 was down 14 points or 1.1 per cent, to 1310.
Energy stocks were by far the biggest drags on performance, with Canadian stocks sliding 3 per cent and U.S. stocks falling 3.4 per cent. Materials, which include gold producers, fell 2 per cent in Canada and 1.5 per cent in the United States.
Commodity prices themselves were largely to blame for the setbacks. The CRB index of 19 commodities was down 2 per cent, marking its biggest one-day reversal in nearly a month. Specifically, crude oil slumped more than $4 (U.S.) a barrel, to $105.80. Gold fell $15 an ounce, to $1448.
What's to blame? There is no shortage of culprits. Two more earthquakes in Japan amid a more serious assessment of the nuclear crisis there clearly rattled some investors who are concerned about the ongoing implications for the economy.
As well, the International Energy Agency warned on Tuesday about the impact of rising oil prices on the global economy, marking the second such warning in two days. On Monday, the International Monetary Fund released similar concerns about rising energy prices.
Meanwhile, Goldman Sachs strategists said that the commodities boom is coming to a close and recommended investors step away from long positions on key commodities such as crude oil, copper, cotton and platinum - otherwise known as the CCCP trade.
"Although we believe that on a 12-month horizon the CCCP basket still has upside potential, in the near term risk-reward no longer favours … the basket," Goldman Sachs said in a research note.
The commodity rout comes one day after Alcoa Inc. kicked off the unofficial start of the first quarter earnings season in the United States. While the aluminum producer topped earnings forecasts by a penny, it missed revenue expectations. The shares fell 6.4 per cent.