TORONTO - Stock markets retreated Tuesday on top of steep losses last week as pessimism about the global economy took a big bite out of bank stocks and investors worried about the survival of General Motors Corp.
Toronto's S&P/TSX composite index tumbled 299.4 points to 8,378.7 after losing more than 3.5 per cent last week, while the Dow Jones industrial average dropped 297.81 points to 7,552.6, a fraction of a point away its low hit in November.
The Canadian dollar was also pounded alongside other major currencies as investors piled into the American greenback, down 1.27 cents from Monday's close to 79.13 cents U.S. after going as low as 78.9 cents U.S.
The TSX Venture Exchange dipped 6.48 points to 919.16.
The Nasdaq composite index fell 63.7 points to 1,470.66, while the S&P 500 index lost 37.67 points to 789.17.
The latest turbulence to hit markets comes after a weekend meeting of G7 finance ministers and central bankers failed to reassure investors.
Gavin Graham, director of investments at BMO Asset Management, said the markets are reacting to the sudden fall of economies around the world and compared the situation to OPEC's quadrupling of oil prices from $3 to $12 following the Yom Kippur war of 1973.
"You just had effectively the equivalent of that in the financial markets where (lending) spreads for LIBOR, TED went from under one per cent to 4.5 per cent because of (the bankruptcy of investment bank) Lehman Bros," Graham said.
Investors were also worried that General Motors Corp. and Chrysler LLC might not be able to prove that they can repay billions of dollars in government loans and return to profitability.
GM has already received US$9.4 billion from the government and could get another US$4 billion if the Treasury Department signs off on its viability plan. Chrysler has borrowed US$4 billion and is seeking another US$3 billion.
Sam Stovall, chief investment strategist at Standard & Poor's, said investors are nervous GM will say it cannot survive without additional funds -- an admission that would then lead investors to ask, "what if GM does go under?"
The failure of a company with the name recognition of GM would "impact the psyche of the average consumer," Stovall said.
GM shares plunged 32 cents to US$2.18 .
Wal-Mart Stores Inc. shares gained $1.71 to $48.24. The retailer beat analyst estimates even as fourth-quarter profit fell seven per cent to $3.8 billion, however the company also said that first-quarter earnings could miss Wall Street expectations.
The Toronto financial sector was the major decliner, down 6.4 per cent and extending last week's losses on unrelenting concerns about the stability of the global financial system.
Royal Bank (TSX:RY) moved down $1.65 to $28.15 while Manulife Financial (TSX:MFC) dropped $1.86 to $15.67.
The TSX energy sector dropped five per cent as the March crude contract in New York moved $2.58 lower to $34.93 a barrel. EnCana Corp. (TSX:ECA) declined $2.81 to C$51.30 in Toronto and Suncor Inc. (TSX:SU) gave back $1.71 to $22.82.
The base metals sector sagged 3.5 per cent as FNX Mining (TSX:FNX) stepped back 13 cents to $3.87 .
Shares of Teck Cominco Ltd. (TSX:TCK.B) fell 48 cents to $4.44 after the company reported that one-time charges and a sharp drop in commodity prices dragged the debt-strapped mining giant into a loss of $607 million or $1.28 a share for the fourth quarter. The results reversed year-earlier profits of $280 million or $1.12 a share.
Cameco Corp. (TSX:CCO), the world's largest uranium miner, says its well-established customer base and growing demand for nuclear energy will help it weather the economic downturn and ongoing problems at its flooded Cigar Lake mine in Saskatchewan. Its shares were down $1.03 to $18.17.
The latest flight to safety boosted gold prices with the April bullion contract on the Nymex up $25.30 to US$967.50 an ounce. The gold sector ran up 4.5 per cent with Goldcorp Inc. (TSX:G) ahead $1.33 to $40.45 and Barrick Gold (TSX:ABX) advanced 49 cents to $47.19.
Research In Motion Ltd. (TSX:RIM) continued to be a weight on TSX, losing $3.51 to $56.54 after RIM said co-CEO's Bastille and Lizards and two former executives have settled allegations of stock option back dating with the U.S. Securities and Exchange Commission. Total monetary penalties of US$1.4 million are to be paid.
A key lender is demanding Canadian Superior Energy Inc. (TSX:SANG) completely repay a $45-million credit line by next Monday -- the latest challenge to hit the troubled oil and gas company. Canadian Superior is in talks with the Canadian Western Bank (TSX:CBC) in hopes of extending the repayment deadline past Feb. 23. Canadian Superior shares plunged 20 cents or 29.9 per cent to 47 cents while Canadian Western Bank shares fell 22 cents to $11.01.
