Equity markets in Toronto went dramatically south Wednesday, what with commodity prices weakening, amid worries that Italy’s borrowing costs are more than that country can chew, and how those worries can affect world economies.
The S&P/TSX composite index plummeted 332.63 points, or 2.7%, to 12,156.22
The Canadian dollar dumped 1.14 cents to 97.89 cents U.S.
Markets cheered Tuesday after Italian Prime Minister Silvio Berlusconi announced its resignation once parliament in Rome passed a new austerity budget.
Moods turned downward soon after, though, as yields for Italy’s 10-year bond surmounted 7%, and doubt returned as to who would take over from the wealthy Berlusconi. Yields around 7% are said to be unsustainable over the long run, and Wednesday, the yields surged to 7.41%, up nearly a full percentage point from Tuesday.
The TSX energy sector took a beating while Suncor Energy shed $1.85 to $31.44 and Cenovus Energy lost $1.62 to $33.13
Metals also fell back as the December copper contract in New York lost nine cents to $3.44 U.S. a pound.
The mining sector tumbled as Teck Resources dropped $2.52, or more than 6%, to $37.73 and First Quantum Minerals retreated $3.23, or more than 14%, to $19.76.
Railroad stocks fell alongside resource companies as Canadian National Railways gave back $1.56 to $79.06.
Worries about the European banking system pushed the TSX financial sector down and Royal Bank – Canada’s biggest -- declined $1.29 to $45.13.
In the gold sector, Barrick Gold Corp. descended into the red 26 cents to $52.24
Earnings season chugged along, with news from several firms. Shares in home improvement retailer Rona Inc. gave back 17 cents to $9.39 as it reported net income of $50.1 million in its third quarter, up from $48 million in the same quarter last year. Revenues were $1.3 billion, up $27.9 million.
Enbridge Inc., a major oil pipeline operator and natural gas distributor, says quarterly profits were down to $4 million, or a penny per share, from $157 million or 21 cents per share a year earlier as it booked derivatives losses. Adjusted earnings, which filter out the mark-to-market values, increased to $241 million from $195 million and its shares were down 34 cents to $35.01.
Silvercorp Metals Inc., a Vancouver-based company which operates mines in China, has raised its quarterly dividend by 25% to 2.5 cents. The move comes a day after the miner reported its latest quarterly profits jumped sharply on a 71% increase in revenues. Its shares were down 35 cents at $9.27.
Wi-LAN Inc., which primarily collects licensing fees from companies that use technologies covered by its portfolio of patents, reported that its quarterly rose to $7.3 million U.S. as it strengthened its revenues. The results were equal to six cents per share, compared to a loss of $6 million, or six cents per share a year earlier. Its shares were down 63 cents to $6.76.
Quebecor Inc. shares slipped 41 cents to $33.25 as it said its net income in the third quarter amounted to $26.1 million, or 41 cents per basic share. That was down from $56.9 million, or 88 cents per share, in the third quarter of 2010. Revenue during the quarter, however, was up $44.9 million to $1.01 billion, compared to $969.9 million in the same quarter last year.
On the economic front, Statistics Canada’s new housing price index crept up 0.2% in September, following a 0.1% improvement in August.
ON BAYSTREET
The TSX Venture Exchange shed 48.67 points to 1,621, while the Nasdaq Canada index gave back 20.85 points to 408.82
All 14 Toronto subgroups lost ground, weighed mostly by metals and mining, which tanked 7.7%, while global base metals fell 6.1% and energy got bruised 4%.
ON WALLSTREET
In New York, investors scurried Wednesday, shaken to the core by fears that Italy, Europe's fourth-largest economy, was headed deeper into crisis mode.
The Dow Jones Industrials hurtled earthward 389.24 points, or 3.2%, to 11,780.90
The S&P 500 tripped 46.82 points to 1,229.10, while the Nasdaq Composite Index slid 105.84 points to 2,621.65.
U.S. stocks sold off sharply right from the open after Italy's 10-year bond yield spiked above 7% -- its highest since the euro was launched in 1999.
Reiterating, the 7% figure is a psychological trigger for investors since it was the level that heightened worries about Greece, Ireland and Portugal. All three eventually needed some type of bailout.
The selling intensified in the afternoon amid reports that European Union officials said they have no plans to rescue Italy.
The fear factor wasn't confined to U.S. stocks. European markets also sold off and the euro slumped more than 2% against the U.S. dollar. The market's spook gauge, the VIX, spiked 22% to 33.60. Any reading above 30 signals investor worry.
Bank stocks took the squarest blows, with Citigroup Goldman Sachs and Morgan Stanley down more than 7%. JPMorgan Chase, Bank of America and Wells Fargo shares fell more than 4%.
Adobe shares tumbled after the company announced it is issuing 750 layoffs, or dismissing 7% of its workforce, and will no longer develop the Flash Player for mobile devices. Adobe also lowered its earnings forecast for the fourth quarter.
Shares of General Motors slid after the automaker posted lower third-quarter earnings of $1.7 billion U.S. CEO Dan Akerson said in the earnings release that the solid performance in the quarter "isn't good enough."
Shares of Macy's fell after the retailer reported earnings results that missed expectations.
Dean Foods shares also slipped although the company posted a smaller-than-expected loss for the third quarter and raised its full-year outlook.
Cisco Systems was scheduled to report earnings after the market close.
Economically speaking, wholesale inventories fell 0.1% in September. Analysts surveyed by Briefing.com were expecting inventories to have increased by 0.5% for the month.
The 10-year yield fell to 1.96% from 2.06% late Tuesday, on higher prices. Treasury prices and yields move in opposite directions.
Oil for October delivery surrendered 60 cents to $96.20 U.S. a barrel
Gold prices dipped $28.76 to $1,770.44 U.S. an ounce.
