A traders works on the floor of the New York Stock Exchange Oct. 15, 2014. U.S. stocks opened sharply lower on Wednesday as economic data reinforced concerns about the health of the world economy and that corporate merger activity may be slowing.BRENDAN MCDERMID/Reuters
The steep retracement on North American stock markets continued for another session Wednesday with Toronto and New York markets registering triple-digit declines.
The S&P/TSX composite index dropped 294.7 points to 13,742.02 as worries about the state of the global economy helped push the Toronto market further into correction territory, losing more than 11 per cent since the record highs of last month.
U.S. markets moved closer to a formal correction, defined as a plunge of at least 10 per cent from recent highs. The Dow Jones industrials fell 344.8 points to 15,970.43, the Nasdaq lost 77.94 points to 4,149.23 and the S&P 500 index declined 41.11 points to 1,836.59.
The Canadian dollar was at a 5 1/2 year low of 88.52 cents (U.S.), as traders shunned risk and bought into the U.S. dollar. The benchmark U.S. Treasury yield stood at two per cent, down 0.2 of a point from Tuesday.
European stocks were also under stress on Wednesday, with a key index suffering its biggest one-day slide in nearly three years as investors slashed exposure to risky assets on mounting worries about global growth.
The slump represented a wipe-off in market value of about $255-billion for European stocks listed on the broad STOXX Europe 600 index. That is more than Portugal's GDP and more than the entire market capitalization of Europe's biggest oil company, Royal Dutch Shell.
Shares extended their slide in afternoon trading after data showed U.S. retail sales declined in September and prices paid by businesses fell, fueling concern that consumer demand may be faltering while inflation is failing to gain traction.
Greek equities were among the biggest losers, as Athens's benchmark ATG index succumbed to a second day of selling pressure and sank 6.3 per cent. Traders cited political uncertainty and a spike in Greek 10-year bond yields, which rose above 7.6 per cent.
Worries about the economy deepened as U.S. retail sales for September came in weaker than expected, falling 0.3 per cent amid broad weakness, against the 0.1 per cent decline that economists had expected.
Markets have headed steadily downward since last month but the sell-off gained momentum last week as a string of disappointing German economic data raised concerns that Europe's biggest economy could be headed back into recession. Also, the International Monetary Fund again revised downward its global growth projections.
Growth concerns have particularly hammered oil prices, which have fallen to 2 1/2 year lows after the International Energy Agency slashed its oil-demand growth forecast for this year by more than a fifth. On Wednesday, November crude in New York was 20 cents lower at $81.64 (U.S.) a barrel.
The TSX energy sector has been the major weight on the Toronto market, plunging 19 per cent over the last month. It was down another 2.58 per cent Wednesday.
The sell-off on markets is also taking place amid a number of other concerns, including the end this month of the Federal Reserve's latest program of quantitative easing, the program of massive bond purchases that kept long-term rates low and fuelled a rally on stock markets over the last few years.
The state of the European economy has also depressed the euro and pushed the U.S. dollar higher. The higher greenback has helped depress commodity prices and raised concerns that it could weigh on the earnings of American multinationals.
New York indexes have yet to enter correction territory. Still, the Dow has lost about seven per cent since September 19 while the S&P 500 has fallen almost nine per cent. Both indexes had been at or close to record levels and a correction has been widely expected since there hadn't been a retracement in three years.
And now that the retracement is gaining momentum, analysts caution that the sell-off likely has a way to go.
"Peak to trough, we can easily correct anywhere from eight to 13 per cent without really altering the long term picture," said Sid Mokhtari, a market technician at CIBC World Markets.
"We're getting closer to a good bottom. We should put things into perspective and not necessarily fear what is coming at us at this point."
The financials group was the leading decliner, down 3.22 per cent.
The TSX also felt added pressure from the base metals group, down another 1.9 per cent for a loss of 20 per cent over the last month, as December copper gave back seven cents to $3.02 a pound.
Rail stocks continued to fall alongside miners, taking the industrial group down 1.3 per cent.
The gold sector gave some lift, up 1.45 per cent as bullion prices erased early losses as December bullion gained $6.90 to US$1,241.20 an ounce.