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Traders at the oil pit at the New York Mercantile Exchange (Peter Morgan/Reuters)
Traders at the oil pit at the New York Mercantile Exchange (Peter Morgan/Reuters)

The close: TSX falls more than 2 per cent, sheds all of 2013's gains Add to ...

The Toronto stock market tumbled about two per cent Wednesday, shedding all its year-to-date gains amid worries that the American economy is faltering and geopolitical concerns centred around threats from North Korea.

The S&P/TSX composite index plunged 259.98 points to 12,422.12 in a selloff spread across most sectors in the wake of a report that had traders reconsidering their expectations for March job gains and other data pointing to slower expansion in the American non-manufacturing sector.

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The Canadian dollar ro se 0.04 of a cent to 98.57 cents US.

U.S. indexes were also lower as the Dow Jones industrials gave back 111.66 points to 14,550.35, the Nasdaq was down 36.26 points at 3,218.6 and the S&P 500 index slid 16.56 points to 1,553.69.

Two days before the release of the U.S. government’s jobs data for March, Automatic Data Processing reported that the American private sector created 158,000 jobs last month, which was below the 215,000 reading that markets had expected. Before the release of the ADP data, economists had expected the government’s report would show a total of 190,000 jobs were cranked out.

And the U.S. Institute for Supply Management’s non-manufacturing index for March came in at 54.4, down from the February reading of 56 and below forecasts for a 55.5 reading.

That report came on the heels of another ISM report earlier in the week showing expansion in the manufacturing sector also faltering.

“The survey was the third disappointing number for the U.S. economy in March... joining earlier readings on consumer confidence and the ISM factory index,” said CIBC World Markets senior economist Avery Shenfeld.

“They hint that a strong Q1 in the U.S. economy may have seen a loss of momentum in its final month, boding less well for Q2.”

Traders were also rattled after Washington said a missile defence system was being sent to the Pacific island of Guam amid continued threats from North Korea.

The move came a day after the North said it would restart its long-shuttered plutonium reactor and a uranium enrichment plant. Both could produce fuel for nuclear weapons that North Korea is developing.

Also, the South Korean news agency Yonhap said that North Korea’s military has announced that it would take a series of military actions against the United States.

Defence secretary Chuck Hagel said North Korea’s rhetoric presents a real, clear danger and threat to the U.S. and its allies.

The negative showing on markets comes at a time when the Dow industrials has surged more than 10 per cent on what had been a steady stream of positive economic data and easing by the Federal Reserve.

It’s a different story on the resource heavy TSX, where the losses of the session erased all gains, modest as they were, for the year. Wednesday’s plunge left the main index down 11 points year to date. At its best level for the year, the TSX was up 3.5 per cent.

Miners have been a big drag on the Toronto market with the base metals sector down 16.3 per cent so far this year, reflecting a slow global economic recovery and metal prices, including copper, that have sunk to eight month lows.

The gold sector has declined even more, down 20 per cent as precious metal miners deal with prices that haven’t kept pace with increasing operating costs.

“As the U.S. market is doing well, money is flowing out of other asset classes, primarily gold, because no one wants to miss out on a good party,” said Kash Pashootan, portfolio manager at First Avenue Advisory, a Raymond James company, in Ottawa.

The energy sector is up a slight 2.1 per cent so far in 2013 as oilsands prices have been depressed by a glut of supply in the U.S.

The third major pillar of the TSX, financials, is up a slight four per cent year to date and has its own problems.

“If you look at how the banks have done over the last three or four years, they had a lot of momentum and the earnings growth that the market has come to expect will be difficult to repeat in the next few years,” added Pashootan.

“You are really seeing the slowing loan growth as well and most of those are consumer loans, so the consumer has slowed – they have reached their maximum capacity.”

The TSX gold sector dropped about 4.6 per cent Wednesday as June bullion on the New York Mercantile Exchange was down $22.40 at US$1,553.50 an ounce on top of a $25 slide Tuesday. Barrick Gold Corp. (TSX:ABX) lost $1.62 to C$27.09 while Goldcorp Inc. (TSX:G) faded $1.18 to $31.64.

May copper shed five cents to a fresh eight-month low of US$3.33 a pound and the metals and mining sector was down 3.3 per cent. Teck Resources (TSX:TCK.B) gave back 86 cents to C$27.03 and First Quantum Minerals (TSX:FM) gave back 72 cents to $17.96.

The energy sector fell 3.3 per cent as the May crude contract declined $2.74 to US$94.45 a barrel. Cenovus Energy (TSX:CVE) declined $1 to C$30.90 and Canadian Natural Resources (TSX:CNQ) fell $1.12 to $31.48.

The financial sector shed 1.39 per cent with Manulife Financial (TSX:MFC) down 48 cents to $14.58 and Royal Bank (TSX:RY) dropped 88 cents to $61.34.

TD Bank Group (TSX:TD) said its long-time president and chief executive, Ed Clark, will retire on Nov. 1, 2014. Clark’s successor will be Bharat Masrani, 56, who is currently head of TD’s U.S. personal and commercial banking group. TD shares slid $1.02 to $83.43.

All sectors retreated save for a slight rise in the utilities group.

The TSX Venture Exchange fell 30.48 to 1,038,62.

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