Skip to main content
The Globe and Mail
Support Quality Journalism
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
Just$1.99
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to globeandmail.com
Just $1.99 per week for the first 24 weeks
Just $1.99 per week for the first 24 weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(select.open)}function setPanelState(o){dom.root.classList[o?"add":"remove"](select.open),dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); }

As the cold wind of a U.S. economic slowdown threatens to become a bitter recessionary storm, investors returned from their holiday break yesterday and went on dumping shares.

The stock markets were stunned by a one-two punch. First came the horrifying results of the latest survey of the National Association of Purchasing Management showing U.S. manufacturing strength at its lowest level in almost a decade. Then investors were hit by a raft of brokerage downgrades of Internet infrastructure stocks based on expectations of weakening technology spending.

It was like "getting hit by a two-by-four right across the head," said David Rosenberg, Merrill Lynch Canada chief economist.

Story continues below advertisement

The U.S. dollar weakened against other currencies, including the Canadian dollar -- a bit of good news for thousands of snowbirds heading south for the winter. The loonie rose briefly above 67 cents (U.S.), ending the day at 66.96 cents for a gain of 0.3 cents from Friday. In the stock market, the selling was broad, spreading to some former darlings that have so far been spared the worst of investors' wrath. These included industrial titan General Electric Co., whose shares fell $4.19 (U.S.) to close at $43.75.

Shares in Internet infrastructure firms, once thought to be a bullet-proof way to make money from the headlong growth of the Web, were shot down by U.S. brokerage firm Robertson Stephens & Co., which warned they are vulnerable to a slump in technology investment.

"We believe the impact of this spending slowdown will be dramatic enough to impact even [data]storage and security vendors that we previously viewed as relatively immune," Robertson Stephens analyst Dane Lewis said in a report.

On the first trading day of the year, America's tech-heavy Nasdaq Stock Market composite index slumped 178.66 points or 7.2 per cent to close at 2,291.86. The Nasdaq, which dropped 39 per cent in 2000, is now at its lowest closing level since March 3, 1999.

The Toronto Stock Exchange's 300-share index lost 322.17 points or 3.6 per cent to end at 8,611.51. Heavyweight Nortel Networks Corp. fell $2.95 (Canadian) to close at $45.30 and Blackberry pager-maker Research in Motion dropped nearly a third of its value.

In Toronto, high-flying bank and life insurance shares, which had so far been impervious to the market's otherwise bearish sentiment, finally fell as the news of an economic slowdown sank in -- even though a weak economy means lower interest rates, which are good for banking profits.

Royal Bank of Canada shares, which gained 60 per cent last year as investors looked for safe havens, fell $2.85 to close at $48. Manulife Financial Corp., whose shares soared 155 per cent in 2000, dropped $1.20 to $45.75.

Story continues below advertisement

Still, there were a few bright spots in yesterday's markets as investors grabbed some more conservative stocks in hopes they can ride out ugly economic times.

Makers of big consumer products gained ground as market players continue to seek companies whose good are in constant demand. "Good things have been happening in those stocks for the last three or four months," said Richard Rooney, president of Toronto money manager Burgundy Asset Management.

Cigarette giant Philip Morris Cos. rose $2.19 (U.S.) to close at $46.19 on the New York Stock Exchange, up from less than $20 last January, after a Wall Street Journal piece referred to the stock's generous dividend yield of more than 4 per cent.

Shares in cereal maker Kellogg Co. rose 6 cents to close at $26.31 in New York while chewing gum seller William Wrigley Jr. Co. gained 25 cents to close at $96.06.

Gold shares also gained, with Barrick Gold Corp. rising 95 cents (Canadian) to close at $25.56 in Toronto, as a slumping U.S. greenback raised the possibility of higher gold prices in dollar terms. The U.S. dollar hit a six-month low against the euro.

Report an error Editorial code of conduct
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies