TORONTO — Canada's main stock index had its worst day in more than three years on Wednesday as North American markets plummeted on a broad sell off by nervous investors.
All asset classes except gold and safe haven currencies were firmly lower as risk aversion was the underlying tone on the day, says Candice Bangsund, portfolio manager for Fiera Capital.
"I think equity markets are getting a little spooked that the rise in interest rates is going to impact valuations and erode, potentially, corporate profits and this is obviously coming at a time when equity valuations have been so lofty," she said in an interview.
The Toronto Stock Exchange was lower for a fourth-straight day.
The S&P/TSX composite index closed down 336.65 points to 15,517.40, marking the biggest daily decline since September 2015. The decrease wiped out all gains since the end of April.
The market hit a low of 15,511.84 on 339.3 million shares traded.
Gold stocks rose by more than two per cent on a higher price of gold. The December gold contract was up $1.90 at US$1,193.40 an ounce.
Health care was down only slightly as losses were offset by a 15.1 per cent increase at Aphria Inc. on reports that Marlboro cigarette maker Altria Group Inc. is in talks with the Canadian pot grower.
Industrials led on the downside, declining by 4.9 per cent as SNC-Lavalin's shares hit a multi-year low after it announced that federal prosecutors won't agree to negotiate a deal that would set aside unproven fraud and corruption charges.
The losing sector was followed by information technology, energy, base metals and consumer discretionary.
In New York, the Dow Jones industrial average lost 831.83 points to 25,598.74 as all stocks were in the red. It was the biggest daily selloff since February. The S&P 500 index was down 94.66 points to 2,785.68, while the Nasdaq composite was down 315.97 points to 7,422.05.
Bangsund said the indiscriminate selling indicates that many nervous investors were unwinding positions despite strong earnings expectations.
She said the global economy remains in great shape even though the International Monetary Fund on Tuesday downgraded its outlook for growth of the world economy to 3.7 per cent, citing rising interest rates and growing tensions over trade.
The selloff could eventually present buying opportunities once the frenzy subsides, Bangsund noted.
"This could create some fairly compelling entry points to the market as soon as these conditions are washed out."
The Canadian dollar traded at an average of 76.97 cents US compared with an average of 77.13 cents US on Tuesday. The decrease came on lower oil prices despite potential supply disruptions from a hurricane hitting Florida's Gulf Coast.
The November crude contract was down US$1.79 at US$73.17 per barrel and the November natural gas contract was up 1.8 cents at US$3.28 per mmBTU.
The December copper contract was down 2.6 cents at US$2.78 a pound.
Ross Marowits, The Canadian Press