A trader works on the floor of the New York Stock Exchange (NYSE) in afternoon trading on Dec. 3 in New York City.Spencer Platt/Getty Images
Canadian stocks fell on Thursday as the nation's largest banks retreated on earnings amid comments by central bank officials in the U.S. and Europe.
Toronto-Dominion Bank, the nation's largest lender, and Canadian Imperial Bank of Commerce declined at least 1.4 per cent to pace a drop in financial services stocks. Higher earnings at Toronto-Dominion offset $243-million in restructuring costs related to job cuts. CIBC tumbled after net income slid.
Global markets slipped as some investors were disappointed by the extent of the European Central Bank's latest moves. The ECB will extend its quantitative easing program until at least March 2017 and is "willing and able" to act further if needed, ECB President Mario Draghi said.
The central bank kept the pace of monthly bond purchases steady at €60-billion euros ($65-billion U.S.) while expanding the program to include debt issued by regional and local governments, and also cut its deposit rate a further 10 basis points to minus 0.3 per cent. Some economists had predicted a deeper cut, while some analysts had called for the central bank to accelerate its bond purchases.
The Standard & Poor's/TSX Composite Index slipped 139.15 points, or 1.03 per cent, to 13,324.67 in Toronto, after sliding 1.3 per cent Wednesday for the biggest loss since Nov. 12. The benchmark equity gauge has dropped over 8 per cent this year, trailed only by Singapore and Greece among developed markets.
Energy and raw-materials producers, which account for about 30 per cent of the index, have each slumped more than 20 per cent this year and are the second and third worst-performing industries in the S&P/TSX ahead of health-care stocks.
A combination of slowing economic growth in China, concerns about the economic health of European nations and a rally in the U.S. dollar with impending interest-rate increases from the Fed as soon as Dec. 16 have crimped commodities prices this year.
Barrick Gold Corp. and Goldcorp Inc. increased at least 1.9 per cent as raw-materials producers jumped 0.5 per cent as a group. It was the lone sector of the TSX to increase on the day. Gold futures for February delivery rose almost 1 per cent, rebounding from a February 2010 low.
The energy group fell 0.16 per cent.
Enbridge Inc, Canada's largest pipeline company, fell 3 per cent after raising its quarterly dividend and announcing a five-year strategic plan.
TransCanada Corp, Canada's second largest pipeline operator, fell 2.5 per cent after it said it raised its stake in the Bruce nuclear power plant in Ontario to 48.5 per cent.
In New York, the Standard & Poor's 500 Index slumped the most in two months as Federal Reserve Chair Janet Yellen signalled the economy is nearly ready for higher borrowing costs, while the scale of the European Central Bank's additional stimulus measures disappointed some investors.
Equities fell to their lowest level in almost three weeks as investors grapple with an array of influences, including divergent policies from major central banks, uneven economic data and turbulence in commodities markets. Energy shares slid Thursday for a second session, despite a rebound in oil prices, and health-care companies tumbled for the third time in four days.
The S&P 500 fell 1.4 per cent to 2,049.78, following a 1.1-per-cent slide Wednesday. The gauge sank below its average price during the past 200 days for the first time in three weeks. A measure volatility saw its biggest jump in two months.
The Dow Jones industrial average fell 250.47 points, or 1.41 per cent, to 17,479.21, while the Nasdaq Composite dropped 85.70 points, or 1.67 per cent, to 5,037.53.
There is "no panic, just disappointment'' with the ECB, as the selloff seems to be orderly, Ryan Larson, head of equity trading at RBC Global Asset Management U.S. Inc. in Chicago, said. "Couple that with renewed terrorism concerns following yesterday's tragic events in California, Chairwoman Yellen reiterating again this morning the desire to raise rates sooner rather than later, albeit gradually, and it's all been enough for participants to take money off the table."
Ms. Yellen delivered a cautiously upbeat outlook for the U.S. economy, signaling the conditions necessary for an interest-rate increase have been met and that she hopes to tighten monetary policy slowly after liftoff. Her comments before Congress's Joint Economic Committee were nearly identical to portions of a speech she gave Wednesday to the Economic Club of Washington. Traders are pricing in 72 percent odds the Fed will raise rates at the conclusion of its next meeting on Dec. 16.
As policy makers assess the strength of the economy, an index of activity at service industries expanded in November at the slowest pace in six months, indicating malaise in manufacturing is impeding progress in other parts of the economy. The measure saw its biggest monthly decrease in seven years. A separate report showed applications for unemployment benefits rose last week, maintaining a see-saw pattern around four-decade lows.
The S&P 500 is down 2.5 per cent since a rally Monday to kick off December sent the index to its highest level in almost a month, and to within 1.4 per cent of its record set in May. Performance among the benchmark's 10 main industries was lopsided for a second day as all the groups fell, led by health- care and energy companies which have lost more than 3 percent since Monday's close.
"Everyone was positioned the same way going into today," Michael Block, chief equity strategist at Rhino Trading Partners LLC in New York, said. "It all snowballed and on days when that happens you have a problem. It's the idea the central banks won't be there to bail out equities -- bonds got weaker and equities got weaker."
Oil rebounded from the lowest price in more than six years in London as the Organization of Petroleum Exporting Countries prepares to meet. Gains accelerated as the euro rose the most against the dollar since 2009.
OPEC members clashed over oil output policy at an unusual informal gathering before the group's official meeting in Vienna on Friday. Saudi Arabia held its line on Thursday, insisting other big producers outside the group such as Russia would have to join any cuts, according to a person with knowledge of the discussions. A report that Saudi Arabia may propose an output reduction is "baseless," a Saudi official said.
"We aren't swimming in oil, we're drowning in it," Chip Hodge, who oversees a $9-billion natural-resource bond portfolio as senior managing director at John Hancock in Boston, said . "There were reports that the Saudis would agree to a cut but they were quickly denied. We'll have to wait and see what happens tomorrow but I'm not holding my breath in anticipation of any change."
Futures have tumbled about 40 per cent since Saudi Arabia led the group's decision last year to defend market share. The global surplus is growing after data showed U.S. crude supplies rose to the highest level for this time of year since 1930 and as Russia pumps near record levels. OPEC remains divided over how to stabilize the oil market and needs a consensus among all members before it can change its output target.
Brent for January settlement climbed $1.35, or 3.2 per cent, to end the session at $43.84 a barrel on the London-based ICE Futures Europe exchange, its biggest gain in a month. The contract slid 4.4 per cent to $42.49 on Wednesday, the lowest close since March 2009. Total volume was 16 per cent above the 100-day average in New York.
West Texas Intermediate for January delivery rose $1.14, or 2.9 per cent, to settle at $41.08 a barrel on the New York Mercantile Exchange. It dropped 4.6 per cent to $39.94 on Wednesday, the lowest close since Aug. 26. The U.S. benchmark crude closed at a $2.76 discount to Brent.
With files from Reuters