Traders work on the floor of the New York Stock Exchange (NYSE) Feb 9.BRENDAN MCDERMID/Reuters
Financial, utility and energy companies dragged Canadian stocks lower for a third day, as equities worldwide sank amid deepening concerns about the health of the global economy.
The Standard & Poor's/TSX Composite Index slumped 2 per cent to 12,282.65 in Toronto. The benchmark stocks gauge had rebounded in the second half of January to pare its 2016 decline to about 5.6 per cent, making it the second-best performing developed market tracked by Bloomberg this year, after New Zealand.
Canadian shares participated in a sell-off of global equities on Tuesday, which spurred the longest losing streak in the Stoxx Europe 600 Index since October 2014. Worries about growth in China, the world's second-largest economy, and plummeting oil prices has stoked volatility in financial markets, pushing investors out of risky assets and into havens.
Banks contributed some of the biggest losses to the S&P/TSX Tuesday, mirroring a slump worldwide in financial shares. The financial group in the S&P/TSX declined 2.4 per cent as a group and all 26 stocks in the group lost ground. Royal Bank of Canada, Toronto-Dominion Bank, and Bank of Nova Scotia all fell more than 2.3 per cent.
Energy companies also retreated. Suncor Energy Inc. sank 4.54 per cent, while Enbridge Inc. dropped 3.55 per cent.
Utility stocks fell. Fortis Inc. plunged 10.3 per cent after agreeing to buy ITC Holdings Corp. for $6.9-billion in cash and stock, adding its high regulated returns in what will be the largest Canadian takeover of a U.S. utility.
Cineplex Inc rose 4.4 per cent for one of the biggest gain in the S&P/TSX after the movie-theater operator reported fourth-quarter revenue that topped estimates.
U.S. stocks slipped, with the Standard & Poor's 500 Index holding near its lowest since April 2014 while the Nasdaq Composite Index edged closer to a bear market, amid declines in energy and technology shares.
Equity markets are attempting to stabilize after the Nasdaq Composite Index's worst two-day sell-off since August, and an early drop Tuesday that brought it within 1 percent of a bear market. Whipsaw moves in technology, consumer, health-care and industrial companies sent stocks careening between gains and losses throughout the session. Raw-material companies rallied amid weakness in the dollar, while energy sank with oil prices.
The S&P 500 slipped 0.1 per cent to 1,852.36 in New York, after erasing an early 1-per-cent loss and climbing as much as 0.8 percent. The Nasdaq Composite Index fell 0.4 per cent after lurching between gains and losses.
"It's quite a tussle between the bulls and bears," said John Carey, a Boston-based fund manager at Pioneer Investment Management Inc., which oversees about $230-billion. "Some people think this is a temporary setback and that the market maybe got a little ahead of itself -- that nothing is really wrong with the economy and this is a good buying opportunity. Others think the market is indicating a slowdown in months ahead."
Speculation that Deutsche Bank AG is considering buying back billions of its bonds fueled an afternoon rebound in equities. Deutsche Bank's U.S.-listed shares trimmed declines of more than 4 per cent after the Financial Times report on the bond repurchase. The bank's perceived creditworthiness and a fresh rout in crude added to doubts about the strength of the worldwide economy.
Declines in banks and technology stocks have weighed on U.S. equities in the market's latest rout, the worst for the Nasdaq Composite Index since August. The gauge briefly rebounded today after approaching a bear market before closing lower, down about 18 percent since its record last July.
As global stocks near a bear market, volatility is on the rise. The Chicago Board Options Exchange Volatility Index touched the highest level in five months. The measure of market turbulence known as the VIX jumped 20 per cent over the prior three days.
A gauge of lenders in the S&P 500 has plunged more than 25 per cent since a July peak to its lowest level since October 2013 as bearish sentiment intensified this month. Nine of the 17 members of the S&P 500 Banks Index have lost at least 20 per cent just this year.
Amid growing concern over China, volatile oil prices and the trajectory of U.S. interest rates, all 24 developed-market indexes tracked by Bloomberg worldwide are down in 2016. Some strategists are losing their resolve in keeping bullish calls on the S&P 500, and have trimmed their year-end projections. The average estimate calls for the benchmark to end December at 2,168 -- a 17-per-cent rally from Monday's close, but a gain of just 6.1 per cent for the year.
While the S&P 500's valuation of 15.4 times the forecast earnings of its members is in line with the average of the past five years, the measure has plunged 13 per cent since the start of the year and is at the lowest level since October 2014. The gauge remains more expensive than developed markets in Europe, where the Stoxx 600 Index trades for 13.8 times estimated earnings. That's down from a record valuation of 17.4 times notched in June.
Investors have been on guard for any signs of weakness spilling over from China while scrutinizing mixed signals from economic reports and corporate earnings. Federal Reserve Chair Janet Yellen is scheduled to testify before Congress on monetary policy Wednesday and Thursday.
Data Tuesday showed job openings in climbed in December to the second-highest level on record, a sign demand for labor remains strong. A separate measure showed wholesale inventories in December fell less than economists forecast.
With the onset of the latest bout of financial market turbulence, investors have further cut the probability they see of interest-rate increases, pricing virtually no chance of the Fed raising borrowing costs in March and 4-per-cent odds in April, down from 17 percent on Friday.
With the U.S. reporting season more than half way through, about 77 per cent of S&P 500 members have so far topped profit estimates, while less than half have beaten sales projections. Analysts estimate earnings at companies in the gauge fell 4.5 per cent in the fourth quarter, and will drop another 6.3 percent in the current period. Walt Disney Co. is among companies posting results Tuesday.
Crude tumbled the most in five months in London as price volatility climbed to a seven-year high and Goldman Sachs Group Inc. warned of wider swings to come.
Brent futures fell 7.8 per cent as global equities neared a bear market. Volatility is set to "spike" as prices seek an equilibrium, which could drag oil below $20 a barrel, Goldman Sachs said. The CBOE Crude Oil Volatility Index, which measures expectations of price swings, rose as high as 73.52, almost the highest since 2009. The world oil surplus will be bigger in the first half of this year than previously estimated, according to the International Energy Agency.
"The IEA data shifted attention back to the global glut," said John Kilduff, a partner at Again Capital LLC, a New York- based hedge fund that focuses on energy. "It dashed any hopes of supply and demand coming into balance anytime soon."
Oil is down about 25 per cent in New York this year on speculation a global glut will persist amid the outlook for increased exports from Iran after the removal of sanctions and brimming U.S. crude supplies. Futures dropped to a 12-year low of $26.19 in January. U.S. crude inventories rose above 500 million barrels to the highest since 1930 in the week ended Jan. 29.
Brent for April settlement dropped $2.56 to $30.32 a barrel on the London-based ICE Futures Europe exchange. It was the biggest decline since Sept. 1. The European benchmark crude closed at a 58-cent premium to West Texas Intermediate oil for April delivery.
WTI for March delivery slipped $1.75 to settle at $27.94 a barrel on the New York Mercantile Exchange. It was the lowest close since Jan. 20. Total volume traded was 58 per cent higher than the 100-day average.
After a four-day rally that sent gold above $1,200 an ounce for the first time since June, the momentum started to fizzle on Tuesday as Goldman Sachs Group Inc. predicted the gains won't last.