TMX Group tickers zoom across banners in Toronto on May 10, 2013. North American markets delivered a "dose of reality" to investors Thursday, as it pulled back sharply, led by declines in metals and financial stocks.Frank Gunn/The Canadian Press
North American markets delivered a "dose of reality" to investors Thursday, as it pulled back sharply, led by declines in metals and financial stocks.
The S&P/TSX composite index lost 227.0 points, closing at 14,893.57 points.
The big drop is the fifth straight decline for the Canadian market and takes the TSX below 15,000 for the first time since late June. However, the S&P/TSX composite is still up nearly nine per cent so far this year.
"Investors in Canada over the near term have become complacent because the Canadian market has outperformed," said Brian Belski, chief investment strategist for BMO Capital markets.
"The issue when stocks go up is that you're believing it more, and now all of a sudden, Canadian stocks are receiving a dose of reality."
Belski said some of the downward pressure could be attributed to profit-taking, but mostly, the market is pulling back from the recent highs.
"We really feel that the momentum trade, especially in the energy and materials space has really skewed prices to the upside so far this year," Belski said. "Now the resulting momentum shift is turning the other way."
TD Waterhouse chief portfolio strategist Robert Gorman says Canadian share prices are highly sensitive to two of the world's most powerful currencies.
"As long as the euro weakens and the U.S. Dollar concomitantly strengthens, North American share prices, especially those of commodity producers or exporters, may well face some further pressure," he says. "This disproportionately affects the TSX due to our larger resource component. This is, to a degree, affected by the seasonal weakness often seen at this time, exacerbated by the uncertainty associated with U.S. mid-term elections being held on November 4. These factors will likely abate in the final months of the year."
Financial stocks were among the biggest decliners on the Toronto exchange, down 2.18 per cent. Out of the country's five biggest banks, CIBC suffered the biggest loss, as its shares took back 3.43 per cent, or $3.60, at $101.36.
The Canadian dollar also fell 0.33 of a cent to 90.11 cents (U.S.), pressured by lacklustre commodity prices. The November crude oil contract dipped 27 cents at S$92.53 a barrel. The December gold bullion contract added $2.40 at $1,221.90 an ounce, while December copper fell two cents at $3.03 a pound.
The sell-off could also be seen across Wall Street, ended the day with the deepest drop in two months. The Dow Jones industrials fell 264.3 points to 16,945.80. The Nasdaq dropped 88.47 points to 4,466.75 and the S&P 500 index lost 32.28 points to 1,966.02.
The move lower came amid signs the U.S. economic recovery is moving at a tepid pace.
The U.S. Labor Department said weekly unemployment benefit applications rose 12,000 to a seasonally adjusted 293,000, while business orders for long-lasting manufactured goods fell by a record 18.2 per cent in August, dragged lower by a plunge in demand for commercial aircraft.
Shares in Apple sank more than three per cent, or $3.39 to $98.36, a day after the tech company pulled the latest software update for its iPhone software after customers complained about dropped calls. Rival Blackberry also saw its stock fall nearly six per cent, or 52 cents, to $11.09. The Waterloo, Ont., company released its latest smartphone, the Passport, on Wednesday and is expected to release its latest earnings on Friday.
Meanwhile, shares in Valeant Pharmaceuticals were up more than three per cent or $4.17 at $141.46 (Canadian) on the Toronto Stock Exchange.
The Canadian drug maker said Thursday that Jeffrey Ubben, founder, chief executive and chief investment officer of health care investment manager ValueAct Capital, would join the company's board on Oct. 1. ValueAct president Mason Morfit had sat on the board until earlier this year when he stepped down citing other commitments.
Valeant has been actively pursuing a takeover bid for Botox-maker Allergan maker. The Irvine, Calif., based company has rejected several acquisition bids from Valeant, the latest amounting to about $53-billion (U.S.).
Retailer Sears Canada says its chief executive, Douglas Campbell, intends to resign and return to the United States by the end of this year to tend to personal family issues. Campbell had headed the struggling company for about a year after its last CEO, Calvin McDonald, announced he was leaving the company in the midst of a three-year turnaround plan. Shares in the company were up 37 cents at $13.02 (Canadian).
- with files from the Globe and Mail