TSX, Dow continue slide on weak economic news

A round of dismal economic numbers out of the U.S. and worries about the world economy hammered Toronto and New York markets Wednesday.

Low oil prices hammer TSX, U.S. investors depressed by new economic data

Dismal economic numbers out of the U.S. hammered both the New York and Toronto markets Wednesday. The S&P/TSX composite index was down 140 points in late morning to 13,896, while Dow Jones was down 203 points to 16,111. (Mark Lennihan/Associated Press)

A round of dismal economic numbers out of the U.S. and worries about the world economy hammered Toronto and New York markets Wednesday.

The S&P/TSX composite index was down 166.80 points to 13,869.88 at the close, after plunging more than 300 points earlier in the day. It officially entered correction territory Tuesday, down 10 per cent since its high in early September.

The Dow Jones industrial was down 173.58 points to 16,141.61, after being off more than 400 points earlier in the day. The broader-based S&P 500 was down 34 points to 1843 on Wednesday afternoon.

The sell-off erased the stock market's gains for 2014. It pushed the Nasdaq composite toward a correction. And it sent investors scrambling for the safety of U.S. government bonds.

"It's a function of the U.S. being the best house in a bad neighbourhood," said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management. "There's still uncertainty about economic growth, primarily on a global basis."

Investors`worries about the economy deepened with a report U.S. retail sales for September fell 0.3 per cent amid broad weakness. That was much worse than the 0.1 per cent decline that economists had expected.

"This was a disappointing report any way you slice it.," said TD economist Ksenia Bushmeneva.

"The more sombre consumer mood was telegraphed in September's decline in consumer confidence. Moreover, weaker September auto sales and lower gas prices at the pumps were also expected to weigh on nominal retail sales," she said in a note to investors. 

Bushmeneva said the number does cast doubt on the forecast of strong growth in the U.S. this quarter.

"Given the robust pace of job creation, we do not expect weakness in retail sales to be long lasting. That being said, September's disappointing reading does represent a modest downside risk to real GDP forecast of 3.4 per cent (annualized) for the third quarter," she said.

Rally at the end of the day

U.S. businesses increased inventories by 0.2 per cent in August, the smallest amount in a year, further data that suggest the economy is not maintaining its momentum. Growing inventories are considered a sign of confidence among business leaders.

The Dow bounced off a 400-point drop after 2 p.m., when the Federal Reserve delivered some better economic news.

Its latest survey of business conditions shows that six of its 12 regions — Cleveland, Chicago, St. Louis, Minneapolis, Dallas and San Francisco — reported "moderate" growth. Five others described growth as "modest," and one — Boston — described activity as mixed.

The report depicted an economy moving ahead steadily but not at a pace that would prompt the Fed to accelerate its timetable for raising interest rates.

That was enough to send stock prices higher.

In Canada, the falling price of oil, with West Texas Intermediate contracts trading at $81.31 US a barrel in New York, weighed on stocks.

The TSX energy sector plunged 19 per cent over the last month. It was down another 1.4 per cent Wednesday and led TSX decliners. Talisman and Suncor were hit hard.

In the U.S., news that the AbbVie/Shire merger might fall apart also worried investors.

Markets have seen two weeks of turmoil caused by concern about slowing growth of economies around the world.

Andy Busch, a veteran market watcher and editor of the Busch Update, says he`s watching both oil price and global economic numbers.

However he was encouraged by the rally at the end of the day, he said in an interview with CBC's The Exchange with Amanda Lang.

"Now we`re in a spot where a healthy correction has happened – eight per cent,10 per cent, around there – Today was interesting...the moves in bonds were crazy today and yet we saw that massive rally at the end of the day, bonds sold off, stocks rallied," Busch said.

"If we get a close above yesterday`s close, I`d say we`re going to stabilize here."

With files from The Canadian Press