The S&P/TSX composite index might not be struggling with a six-week losing streak that has hit the S&P 500, but - streaks aside - the benchmark Canadian index is closing in on correction territory.
Following slight losses in early trading on Monday, the S&P/TSX composite index hit an air pocket in early afternoon trading, falling to 12,932, down 152 points or 1.2 per cent. Energy and materials stocks led the way down after oil nosedived below $97 (U.S.) a barrel, down $2.55.
The declines follow news that Standard & Poor's has cut Greece's credit rating by three notches, to CCC. The credit rating agency also noted that the fiscally challenged country is "increasingly likely to restructure its debt."
As well, investors continue to struggle with a flow of disappointing U.S. economic news, while oil prices in particular are reacting to news from last week that Saudi Arabia will boost oil production this month and next to help counter rising inflation in some emerging markets.
While the weekly losing streak for the Canadian index is just two, versus six for the S&P 500, the losses are nonetheless starting to pile up. Since its post-recovery high in early April, the index has fallen 9.3 per cent, coming close to the unofficial correction definition of a 10 per cent decline. In the past 10 trading days, it has suffered four triple-digit losses, including Monday's decline.
Information technology stocks, dominated by Research In Motion Ltd., have fallen the furthest, tumbling 21.9 per cent during the overall market's downturn.
However, commodity producers have had by far more influence because they represent about half of the index in terms of their total weight. Energy stocks have fallen 11.6 per cent since early April, but they actually began their descent earlier: From their near-term high in early March, they have fallen 14.2 per cent. Meanwhile, materials have fallen 15.7 per cent since early April.
David Berman