TORONTO - Stock markets racked up steep losses Friday on increased uneasiness about the credit crisis and more bad U.S. economic news.
"The equity markets are not performing well because the credit markets are not performing well,'' said Gareth Watson, Canadian equity adviser at ScotiaMcLeod.
"And I hate to oversimplify things, but really when we look back on this, whether it be five, 10, or 15 years from now, that really is going to be the focus, that when 75 per cent of the world's financings on this planet are done through the debt markets, if that market isn't operating efficiently, it makes it hard to do anything in the equity markets.''
In New York, the Dow Jones industrials fell 315.79 points to 12,266.39, losing 114.63 points on the week.
Toronto's S&P/TSX composite index retreated 291.2 points to 13,582.69 for a flat finish to the week -- just a day after scrambling back above its level at the start of the year for the first time since early January.
The TSX financial sector declined just over two per cent. Royal Bank was down 73 cents to $49.39 after its first-quarter profit fell 17 per cent from a year ago to $1.25 billion, as provisions for U.S. credit losses swelled and RBC Capital Markets took a big writedown. Provisions for bad debts at Canada's largest bank grew by 80 per cent to $293 million.
Bank of Montreal shares were off $2.65 to $49.70 amid deepening troubles in asset-backed commercial paper it manages. DBRS has downgraded two structured-finance vehicles run by the bank from its top rating to "junk.''
The TSX Venture Exchange dipped 27.43 points to 2,782.07.
The Canadian dollar closed down 0.83 of a cent to 101.58 cents US as Statistics Canada reported the current account fell into deficit in the fourth quarter for the first time since 1999.
The broad measure of Canada's transactions with the rest of the world deteriorated by $1.8 billion during the quarter to negative $513 million. The country's surplus on trade of goods shrank while the travel deficit hit a record.
The loonie had earlier soared about four US cents this week, in large part because of American dollar weakness.
U.S. insurance giant American International Group posted a loss of US$5.29 billion in the fourth quarter as a portfolio of risky credit contracts lost $11.12 billion in value. AIG also lost more than $3 billion on "significant, rapid declines'' in investments tied to home loans.
Also unnerving investors was an estimate by UBS analysts that financial firms worldwide will take debt-market writedowns totalling US$600 billion. Writedowns have amounted to US$160 billion so far since the credit crunch took hold last summer.
And there was a report that a bailout plan for U.S. bond insurer Ambac has stalled over the amount of capital a group of banks is willing to put up.
The Nasdaq composite index dropped 60.09 points to 2,271.48 as Dell booked a six per cent decline in quarterly profit, missing analysts' expectations, and warned of reduced customer spending.
The S&P 500 index fell 37.05 points to 1,330.63
Worries about the depth of an American economic slowdown deepened after the Chicago Purchasing Managers Index, a snapshot of manufacturing in the U.S. Midwest, came in at 44.5 -- firmly in contraction and lower than the consensus estimate of 49.5.
The U.S. Commerce Department reported consumer spending rose 0.4 per cent in January, more than economists had been expecting. However, all of that gain came from a surge in inflation.
On the TSX, the energy sector fell two per cent as crude prices slipped after running up more than $4 a barrel this week.
The April crude contract on the New York Mercantile Exchange was off 75 cents to US$101.84 a barrel. Canadian Natural Resources fell $1.44 to C$73.76 and Suncor Energy gave back $2.45 to $101.50.
The base-metals sector was down 3.4 per cent with HudBay Minerals off 85 cents to $18.80 and Teck Cominco Ltd. moving $1.92 lower to $39.27.
The gold sector declined 1.7 per cent although the April gold contract in New York rose $7.50 to US$975 an ounce. Barrick Gold Corp. moved down 80 cents to C$51.20.
Other heavyweight stocks dragging the TSX lower included Potash Inc. $2.30 to $156.48, Bombardier Inc. 18 cents to $5.63 and Research In Motion Ltd. $3.99 to $102.53.
Diversified holding company Onex Corp. edged up 19 cents to $34.19 after CEO Gerald Schwartz said the firm is looking at the distressed credit market as a major opportunity. His comment came as Onex reported annual revenues rose 26 per cent to $23.4 billion.
On the TSX, declines beat advances 1,093 to 535 with 230 unchanged as 413.8 million shares traded worth $7.4 billion.
