TORONTO - The Toronto Stock Exchange had a triple-digit decline Friday as investors fretted about whether the U.S. and global economies are headed for another recession that could punish corporate earnings and sap consumer confidence.
The S&P/TSX composite index lost 179.24 points to 12,007.47, down another 1.5 per cent. It's still slightly ahead of its low close for the year of 11,671 points, booked on Aug. 8.
The index had been in positive territory at several points Friday morning.
But the selloff accelerated throughout the afternoon as traders digested comments from Finance Minister Jim Flaherty and Bank of Canada governor Mark Carney, who testified before the Parliamentary finance committee about the state of Canada's economy after two weeks of frenzied trading on stock markets.
The junior TSX Venture Exchange was down 5.79 points at 1,764.84.
In New York, the Dow Jones industrial average shed 172.93 points to 10,817.65. The S&P 500 index lost 17.12 points at 1,123.53 and the Nasdaq composite index was down 38.59 points at 2,341.84.
Stock markets have posted wild swings for nearly two weeks after a downgrade of the U.S. government's credit rating and worsening fears about Eurozone debts problems.
The TSX lost per cent 4.3 per cent this week alone and is now 15.9 per cent below its April 5 high of 14,270.53, putting it squarely in correction territory.
The Toronto stock market took a beating Thursday, losing nearly 400 points, or three per cent, while Wall Street also lost hundreds of points in another day of volatility after relative calm earlier in the week. The selloff was sparked by a spate of bad economic news from the U.S. and around the world that raised fears another recession may be on its way.
Investors have been trading emotionally since the beginning of August and the latest push into panic mode was a woeful manufacturing survey Thursday from the Federal Reserve Bank of Philadelphia, which renewed U.S. recession fears in particular, said Andrew Pyle of Scotia MacLeod.
Traders are trying to sort out whether the survey is a reflection of poor confidence at that time or whether it indicates something more substantial -- a leading indicator of recession -- Pyle said, noting that the survey was taken in the first 10 days of August when there appeared to be a significant chance the U.S. would have to default on its debt.
"What you're seeing (Friday) is not everyone believes the recession is imminent -- that a lot of this was probably confidence," he said.
"That's what you're seeing play out, that 'Whoa, maybe we've gone too far here'."
The Canadian dollar lost 0.02 of a cent to 101.15 cents US as traders digested the comments from Flaherty and Carney.
Earlier, the loonie had made gains after StatsCan said the pace of inflation eased in July to 2.7 per cent, slower than the 2.9 per cent economists had expected. It was the first time that inflation was below a pace of three per cent since February.
Gold prices added $30.20 to close at its latest record high of US$1,852.20 per ounce after earlier spiking as high as $1881. The global gold index was the biggest gainers on the TSX, up 2.33 per cent with shares in Barrick Gold Corp. (TSX:ABX) up $1.02 to $50.32.
Copper prices were up two cents at US$3.99 per pound. The mining sector was the biggest loser on the TSX, slipping 3.5 per cent with shares in miner Teck Resources Ltd. (TSX:TCK.B) down $1.54 to $37.95.
Crude prices lost 12 cents to US$82.26, finishing down about four per cent for the week. The energy sector on the TSX fell two per cent with shares in Canadian Natural Resources (TSX:CNQ) down 81 cents to $33.10.
Canadian financial companies were one of the biggest decliners on the TSX, with the sector down 3.2 per cent ahead of the start of earnings season next week and on fears of exposure to embattled European banks. Shares in Toronto Dominion Bank (TSX: TD) fell four per cent or $2.90 to $71.10.
Canadian Finance Minister Jim Flaherty told a Parliamentary committee Friday that the current global economic turmoil will impact the Canadian economy, but so far his budget projections remain on track.
"While Canada experienced greater than expected growth in the first quarter, that is expected to be balanced out by a softer than anticipated second quarter," the minister said.
The committee also heard from Bank of Canada governor Mark Carney, who said the U.S. is facing its weakest recovery since the Depression, but is not headed toward another recession.
On Thursday, economists with Morgan Stanley said that the U.S. and Europe are "dangerously close to recession," adding, "it won't take much in the form of additional shocks to tip the balance." JPMorgan Chase & Co. followed suit on Friday, slashing its fourth-quarter growth forecast to one per cent from 2.5 per cent.
Overseas stock markets had larger drops than in North America. European banking stocks fell near two-and-a-half-year lows, dragged down by rumours about banks' potential losses on bonds issued by heavily-indebted governments.
Eurozone debt issues also continue to drag markets, with European banking shares hitting a near 2- 1/2-year low on renewed worries of the health of the continent's banks Friday.
"This week has seen a continuation of the trend of weaker than expected data and political reaction to the European problems which pretty much amounts to 'Let's have a get-together a couple of times a year,' " said Gary Jenkins, an analyst at Evolution Securities.
On Friday, the European Central Bank's chief economist Juergen Stark argued against the introduction of so-called eurobonds, which he says would reduce incentives for troubled countries to tackle budget problems. Some, including the opposition in Stark's native Germany, view at least the limited introduction of eurobonds as the logical solution to the eurozone debt crisis.
In Canadian corporate news, Research In Motion (TSX:RIM) shares gained 3.69 per cent or 94 cents to $26.43 as takeover speculation heated up after an analyst at Jefferies upgraded its rating as a potential acquisition target.
