The S&P/TSX composite index plummeted almost 605 points on Monday as it joined a worldwide market sell-off prompted by growing fears of a U.S. recession.

S&P/TSX composite index three-month chart

The benchmark index finished at 12,132.14 — a loss of 4.8 per cent. That's its biggest one-day percentage loss since February 2001.

Some of the losses Monday were breathtaking. Research in Motion lost $6.80 to $84.50; Potash Corp. dropped $5.93 to $119.57; First Quantum Minerals shed $8.11 to $67.35; Suncor fell $4.52 to $88.32; BCE dropped $1.95 to $34.42.

Drop hit all sectors

Every sector was deeply in negative territory, led by resource and financial stocks. The TSX metals and mining index dropped 7.6 per cent; the energy group slumped 5.7 per cent; financials fell 3.9 per cent.

"One hopes this is the cathartic sell-off that gives us a foundation to work back from," CIBC Wood Gundy managing director Dunnery Best told CBC News.

Monday's sell-off slashed another $95 billion in market value from the TSX. Since the start of the year, the fall in its total market capitalization is more than $260 billion. So far in 2008, the market has lost just over 1,700 points, or more than 12 per cent.

Investors were evidently not impressed by Friday's proposal from U.S. President George W. Bush for a $145 billion US economic stimulus package.  

Also weighing on the benchmark Canadian stock index Monday was a big drop in the price of oil. The price of Brent crude fell $1.72 US to end at $87.51 US a barrel.

Gold prices also plunged $14.80 to $867.45 US an ounce.

The TSX endured a four-day sell-off last week that sliced 961 points from the benchmark index. The 6.6 per cent drop in the index last week was its worst weekly performance since 2000.

"This isn't a 'panic', but in a thin market, with the U.S. closed for a holiday, the scale of the decline today may have been exacerbated by illiquidity — simply not enough bargain hunters around," said CIBC World Markets senior economist Avery Shenfeld.  

"Still, add in the decline last week, and its clear that equity investors are, if not panicky, very worried," he said.

The federal government said global markets were reacting to "growing concern" about the U.S. and global economies and the U.S. housing collapse. 

"Canada's equity markets are not immune to this pressure," said finance department spokesman David Gamble. "Nevertheless, Canada's economic fundamentals remain solid; the unemployment rate is near all-time lows; our fiscal position is strong; and our financial institutions are sound."

Asian, European markets down sharply 

Asian stock markets set the early tone for Monday. Hong Kong's Hang Seng Index closed at 23,818.86, down 1,383.01 points or 5.49 per cent. That was the index's biggest drop since Sept. 11, 2001. Indices in Japan, Australia and China all finished with losses of at least 2.9 per cent.

The selling pressure spread to Europe, where London's Financial Times 100-share index fell 5.5 per cent to end at 5,578.2.

Frankfurt's Dax index dropped more than seven per cent, while France's CAC 40 index was down 6.8 per cent.

U.S. stock markets were closed Monday for the Martin Luther King Jr. holiday, but market futures for the Dow, Nasdaq and S&P were all sharply lower. The Dow's slide in its last four trading days totalled 679 points.

"People are certainly nervous about a potential recession in the U.S. spilling over to the rest of the world," said David Cohen, director of Asian economic forecasting at Action Economics in Singapore.

"Maybe there's still some wariness about [whether] politicians are able to come up with a compromise and act sufficiently quickly" on a stimulus package, Cohen said. "I think the impact would be marginal anyway."

Canadian investors are looking ahead to Tuesday's Bank of Canada decision on interest rates. Economists see the Canadian central bank cutting its key overnight lending rate by 0.25 of a percentage point to four per cent.

The Canadian dollar was about half a cent lower at 96.87 cents US — a four-month low.

With files from the Associated Press