TORONTO — Canada's main stock index suffered its worst performance of the year Friday as investors were spooked by a potential corporate earnings hit from the coronavirus.
The S&P/TSX composite index closed down 56.44 points or 0.32 per cent at 17,565.34, the largest daily decrease since late December.
U.S. markets fared even worse, marking the worst single day drop in months as a second case of the virus that originated in China was reported in Chicago as the number of confirmed cases around the world climbed sharply to more than 850, with at least 26 deaths, all of them in China.
In New York, the Dow Jones industrial average was down 170.36 points or 0.9 per cent at 28,989.73. The S&P 500 index was down 30.07 points at 3,295.47, while the Nasdaq composite was down 87.57 points at 9,314.91.
Beyond causing general uncertainty, the virus is starting to affect companies. Disney has temporarily closed its theme park in Shanghai while Wynn Resorts and Las Vegas Sands cancelled Chinese new year's festivities in Macao.
"These types of things are not only a risk-off mentality but actually could affect corporate earnings, it could affect global economic growth," said Kevin Headland, senior investment Strategist at Manulife Investment Management.
Markets bounced backed Thursday from morning losses after the World Health Organization decided against declaring the outbreak a global emergency for now.
However, fears heightened on Friday that the virus would hurt Chinese economic growth if manufacturing slows as people are quarantined in their homes or cities.
Shares of airlines and companies connected with the Asian market were again hit hard. Air Canada's shares dropped 2.6 per cent.
Headland said there's some selling pressure as investors attempt to get ahead of potential negative weekend news.
"Some people perhaps don't want to wait to Monday to see where the markets open if there perhaps is a spike of confirmed cases over the weekend," he said in an interview.
The Canadian dollar traded for 76.10 cents US compared with an average of 76.09 cents US on Thursday.
A flight to the safety of gold increased prices and helped the TSX to fare better than U.S. markets.
The February gold contract was up US$6.50 at US$1,571.90 an ounce and the March copper contract was down 4.2 cents at US$2.68 a pound.
Materials was among three of the 11 major sectors on the TSX to climb, helped by a 5.2 per cent increase by Endeavour Mining Corp.
Health care was down the most on the day, followed by energy, with crude oil prices for the week falling the most in three months.
The March crude contract was down US$1.40 at US$54.19 per barrel and the March natural gas contract was down 3.4 cents at US$1.87 per mmBTU.
Crude prices fell because of extra global supply and worries that the virus will curtail demand from China, the largest importer of foreign oil.
"Global economic growth remains fairly stagnant and therefore that's a pretty good proxy for the demand of oil. So if we have extra supply in the near-term, demand is not going to necessarily reduce that excess supply."
Crescent Point Energy Corp. shares fell 5.5 per cent. Encana Corp. was down 4.4 per cent on heavy volumes as the Calgary-based company completed its corporate reorganization under the new name Ovintiv Inc. that will see its headquarters move to the U.S.
Markets should turn their focus next week to earnings results unless they are dragged down by more negative virus headlines, said Headland.
"As long as we have some negative news surrounding this virus the market's going to react with a risk-off mentality. Whether it is justified or not, that will be the short-term movement and the risk is to the downside."
This report by The Canadian Press was first published Jan. 24, 2020.
Companies in this story: (TSX:AC, TSX:ECA, TSX:CPG, TSX:EDV, TSX:GSPTSE, TSX:CADUSD=X)
Ross Marowits, The Canadian Press