Canada’s main stock index sank to its lowest in more than four years on Monday, before staging a small comeback by noon hour EDT, as oil prices tumbled and the U.S. Federal Reserve made a second emergency rate cut to avoid the world’s largest economy from falling into a recession.
The TSX Composite Index came off its lows of the morning, but remained negative 913.8 points, or 6.7%, to head into lunch hour at 12,802.53.
The Canadian dollar removed 0.88 cents at 71.61 cents U.S.
Canada’s financial regulator is reducing the amount of capital lenders must hold to guard against risks to the lowest level on record, it said on Friday, as part of a series of measures to help gird against the economic impact of the COVID-19 pandemic.
Parliament rushed through ratification of the new U.S.-Mexico-Canada trade pact on Friday before taking a three-week break to help stop the spread of the coronavirus.
Ontario, which has reported more than 100 new coronavirus cases, said on Saturday it would limit testing for the respiratory illness until it can guarantee a more steady supply of swabs.
Cineplex fell $7.83, or 38.4%, the most on the TSX, to $12.58. Great Canadian Gaming Corp was the second-biggest decliner, falling $5.29, or 18.2%, to $23.73, after it announced suspension of gaming facilities in Ontario, British Columbia, Nova Scotia and New Brunswick until further notice
On the economic calendar, Canadian home sales rose 5.9% in February from the previous month, led by a jump in activity in the Greater Toronto Area, according to the Canadian Real Estate Association.
ON BAYSTREET
The TSX Venture Exchange sank 27.85 points, or 7.1%, to 363.27.
All but one of the 12 TSX subgroups fell midday, with energy down 10.6%, while consumer discretionary and real-estate each tailing off 8.9%.
Gold somehow found some muscle, and gained 1.3%.
ON WALLSTREET
Stocks fell sharply on Monday even after the Federal Reserve embarked on a massive monetary stimulus campaign to curb slower economic growth amid the coronavirus outbreak.
The Dow Jones Industrials came off its morning lows, but still trailed Friday’s finish by 1,642.30 points, or 7.1%, to 21,543.32.
The broader S&P 500 erased 180.52 points, or 6.7%, to 2,530.50.
The NASDAQ slipped 529.51 points, or 6.7%, to 7,345.37
Apple shares plunged by more than 8%. Airline stocks also fell broadly. Delta and United traded at least 10% lower while American lost about 8%.
Bank stocks took a hit, with Bank of America and JPMorgan Chase each dropping more than 12%. Morgan Stanley fell 10.6% while Citigroup dropped 14.4%. The big banks announced Sunday they were halting their buyback programs in an effort to provide capital where needed.
Monday’s losses put the S&P 500 and NASDAQ more than 26% below their record highs set in late February. The Dow was 28% under its all-time high from last month. At one point, the Dow was down 30% from its record.
Investors have been dumping equities amid worries the coronavirus will slow economic growth and take a bite out of corporate profits.
Economists at JPMorgan see negative growth for the first quarter while Goldman Sachs downgraded its first-quarter growth forecast to flat from 0.7%.
Trading was halted for 15 minutes shortly after the open as a then 8.14% drop on the S&P 500 triggered a so-called circuit breaker. It was the third time in the last week the circuit breaker was triggered.
Before the open, futures contracts tied to the major averages hit their “limit down” levels, meaning they could not trade below that threshold. Those limits — along with the regular session’s circuit breakers — are imposed by the exchanges to maintain orderly market behavior.
The Fed cut interest rates down to basically zero, their lowest level since 2015. The U.S. central bank also launched a massive $700-billion quantitative easing program
While the central bank’s actions may help ease the functioning of markets, many investors said they would ultimately want to see coronavirus cases peaking and falling in the U.S. before it was safe to take on risk and buy equities again.
However, the weekend’s news about the coronavirus outbreak was not helping sentiment. U.S. cases have jumped to 3,774 and 69 deaths, according to Johns Hopkins University. The U.S. Centers for Disease Control and Prevention urged organizers to cancel or postpone events with at least 50 people.
Prices for the 10-Year U.S. Treasury soared, dropping yields to 0.82% from Friday’s 0.98%. Treasury prices and yields move in opposite directions.
Oil prices dumped $1.95 to $29.78 U.S. a barrel.
Gold prices thundered lower $12.30 to $1,504.400 U.S. an ounce.
S&P Recovers from Heavy Losses by Noon