Toronto – North American stock indexes plunged steadily throughout the trading session on Thursday, with losses on the Dow Jones industrial average and the Standard & Poor 500 entering correction territory.
In New York, the Dow was down 1,032.89 points, or 4.15 per cent, to 23,860.46, and the S&P 500 index was down 100.66 points, or 3.75 per cent, to 2,581.00. The Nasdaq composite index was down 274.82 points, or 3.90 per cent, to 6,777.16.
The Dow and the S&P 500 are both 10 per cent below the record highs the indexes set just two weeks ago, putting them in what is known on Wall Street as a “correction.”
Corrections are normal occurrences during bull markets, and there hasn’t been one in two years, an unusually long time.
In Toronto, the S&P/TSX composite index was down 264.97 points, or 1.73 per cent, to 15,065.61, in a broad-based decline. The TSX is down 8.2 per cent from its all-time high of 16,412.94, set on Jan. 4.
Gold was the only positive sector on the commodity-heavy index on Thursday, as more investors shifted toward the safe-haven asset. The April gold bullion contract was up US$4.40 to US$1,319.00 an ounce.
Stocks began to fall last Friday after U.S. jobs data showed wages growing more than anticipated, raising worries that creeping signs of higher inflation might push the U.S. Federal Reserve to increase interest rates more quickly. Many market watchers had also been predicting a pullback after the market’s relentless march higher over the past year.
“The strong headlines job numbers and strong wage growth that we saw last Friday have really seen investors worried about the threat of higher inflation and the prospect of higher interest rates in the U.S.,” said Candice Bangsund, a vice-president and portfolio manager at Fiera Capital in Montreal.
“And this has really triggered a spike in volatility because it’s brought into question where higher interest rates are going to curtail the global growth story or erode corporate profitability. So it’s really been very much a risk-off environment.”
Bangsund added there’s not been a lot of rational movements throughout the week’s market rout.
“You need to flush it out and give the markets a chance to reset. Longer term fundamentals are still good,” she said. “Let this thing run its course. Leading up to this, investor bullishness was at extreme levels…. Our intention would be to buy the dip but we’re just not there yet.”
In currency markets, the Canadian dollar closed at an average trading value of 79.46 cents US, down 0.25 of a U.S. cent. The loonie has been sliding since last week as jittery investors have turned to the greenback as a safe haven.
“Because it’s so tied to commodity prices, particularly oil prices, it’s typically considered a bit more of a risky currency,” Bangsund said. “Whereas the U.S. dollar, the Japanese Yen are more of the safe-haven areas where you see investors flocking from the riskier assets.”
Elsewhere in commodities, the March crude contract was down 64 cents to US$61.15 per barrel and the March natural gas contract was down one cent to US$2.70 per mmBTU. The March copper contract was down one cent to US$3.08 a pound.
– With files from The Associated Press.
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