TORONTO - The Toronto stock market fell to levels not seen in more than five years on Monday as a fresh wave of pessimism trumped assurances from U.S. regulators on the financial system.
"There's just a lot of fear in the air and I don't think investors really know what to do," said Adrian Mastracci, portfolio manager at KCM Wealth Management in Vancouver.
"I think they would like to make a decision but I don't think anybody really knows what in the world is going on and how deep this problem is."
Toronto's S&P/TSX composite lost 302.32 points to 7,647.67, its lowest close since October 2003.
New York indexes revisited 1997 levels as investors succumbed to their growing worries about a recession that has no end in sight. The Dow Jones industrials fell 250.89 points to 7,114.78.
The index lost more than six per cent last week, partly on fears the U.S. government will move to nationalize parts of the financial sector, in particular troubled banks Citigroup and Bank of America.
The U.S. Treasury Department, Federal Deposit Insurance Corp., Office of the Comptroller of the Currency, Office of Thrift Supervision and Federal Reserve issued a joint statement saying they will do all they can to shore up the struggling banking system.
The regulators also said they will launch a revamped program to inject fresh capital into financial institutions this week.
"Unless the financials stabilize, it's going to be hard for the rest of the market to have any kind of positive momentum -- even if the news is good in other places," said Kate Warne, Canadian market specialist at Edward Jones in St. Louis.
"With the focus being on the financials skating down, that tends to make everyone nervous about everything else as well."
The statement did not name any specific banks or respond to reports that the government was considering increasing its ownership of Citigroup Inc.
The Wall Street Journal reported that Citigroup is negotiating with government officials to have the U.S. boost its stake in the bank to as much as 40 per cent.
The Journal, which said Citigroup made the proposal to its regulators, noted that sources said executives would prefer to keep the government's stake closer to 25 per cent.
In New York, Citigroup shares were still up 19 cents to US$2.14 .
The Canadian dollar was down 0.12 cent at 79.92 cents US as retail sales fell 5.4 per cent in December to $33 billion -- the largest monthly decline in over 15 years.
Statistics Canada said three-quarters of the December retail decline was rooted in the automotive sector, without which retail sales fell 1.8 per cent.
The TSX Venture Exchange lost 13.96 points to 878.94.
The Nasdaq composite index declined 53.51 points to 1,387.72 while the S&P 500 index slipped 26.72 points to 743.33, falling to 1997 levels.
The TSX financial sector, which lost over 14 per cent last week, fell another 3.5 per cent Monday.
Canada's big banks start to report their first-quarter earnings this week and Warne said expectations are fairly minimal.
"We certainly know the economy is slowing down faster than people expected and at this stage we're expecting the normal buildup in reserves that comes from wherever you see an economic slowdown," Warne said.
"The best that can come out of them is no negative surprises."
Royal Bank (TSX:RY), which reports on Thursday ahead of its annual meeting in Vancouver, lost $1.25 to $25.82, while insurer Manulife Financial (TSX:MFC) moved down 59 cents to $12.53.
The energy sector was down 5.4 per cent after starting the day off positive as gains in crude prices reversed. The crude contract on the New York Mercantile Exchange was down $1.59 at US$38.44 a barrel.
Canadian Natural Resources (TSX:CNQ) fell $1.72 to $36.54 and EnCana Corp. (TSX:ECA) gave back $3.49 to $44.78 .
The gold sector gave back 2.9 per cent as the April bullion contract on the New York Mercantile Exchange fell $7.20 to US$995 after closing above US$1,000 on Friday. Barrick Gold Corp. (TSX:ABX) faded $1.40 to $44.68.
Shares in Iamgold Corp. (TSX:IMG) added cents to $ after the company said proven and probable reserves at the end of 2008 were 9.6 million ounces, an increase of 20 per cent from a year earlier.
The industrial sector was also a major drag, down 4.5 per cent, as Canadian National Railways (TSX:CNR) gave back $ .74 to $39.07 while Bombardier Inc. (TSX:BBD.B) lost 17 cents to $2.63.
Canadian investors also took in a major deal as Nova Chemicals Corp. (TSX:NCX) has agreed to be bought out for US$2.3 billion by Abu Dhabi-based International Petroleum Investment Co. Nova Chemicals shares, which had hit a new low earlier this month, gained C$4.83 to $6.49 in Monday trading.
Toronto-area steel distributor Russel Metals Inc. (TSX:RUS) is cutting 500 jobs and reducing executive and white collar salaries by 10 per cent to deal with a battered steel market. Its shares dropped $1.69 to $14.45.
