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U.S. stock markets on Monday suffered their worst setback in nearly a month, and the Canadian benchmark index was no safe haven either, after investors recoiled from financial stocks and commodity producers alike.
While there were few reasons to hold onto stocks, there were any number of reasons flee: the failure of another regional bank in the United States, an analyst's expectations of another big quarterly loss from American International Group Inc., widening credit spreads that could stifle borrowing – oh, and a technical indicator known as the “jaws of death” (5-year swap spreads versus the VIX volatility index), which is now gaping wide in a troubling development.
The Dow Jones industrial average closed at 11,386.25, down 241.81 points or 2.1 per cent, the biggest drop since July 28. The broader S&P 500 closed at 1266.84, down 25.36 points or 2 per cent. In Canada, the S&P/TSX composite index closed at 13,288.96, down 158.33 points or 1.2 per cent.
While those losses might not send eyebrows up, the span of the losses was remarkable. All 30 stocks in the Dow fell, with the best performer – the best! – falling 0.5 per cent (that would be Hewlett-Packard Co.). At the S&P 500, all 10 subindexes fell between 1.1 per cent (utilities) and 3.1 per cent (financials). At the S&P/TSX, nine of the 10 subindexes fell. In other words, there were few places to hide.
AIG fell 5.5 per cent, bringing the insurance stock to a fresh 18-year low. Bank of America Corp. and JPMorgan Chase & Co. each fell 4.1 per cent.
In Canada, Research In Motion Ltd. fell 3.1 per cent, Royal Bank of Canada fell 1.9 and Suncor Energy Inc. fell 1.7 per cent. Despite the fact that Manulife Financial Corp. slipped 1.8 per cent, Bloomberg News pointed out that AIG's bigger slide put Manulife in the lead as North America's largest insurer by market value.
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