U.S. stocks swoon, TSX also takes triple-digit hit

U.S. stocks slumped Friday, pulling down the Dow Jones industrial average by more than 650 points and handing the U.S. market its worst week in two years.

Technology, banks and energy stocks accounted for much of the broad slide. Several major firms, including Exxon Mobil and Google’s parent company, Alphabet, sank after reporting weak earnings.

Canada’s main stock index also took it on the chin, sliding more than 250 points, down four per cent over the past week, in a broadbased decline that included drops in every sector. The S&P/TSX composite index fell 254.89 points to 15,606.03 Friday.

The last such drop on the TSX was more than seven months ago when it lost about 269 points on May 17, 2017. While all sectors finished Friday in the red, shares in health care saw the steepest losses of an average 6.18 per cent.

Cannabis stocks led the decline in the sector, with Canopy Growth Corp. dropping $3.44 or 12.49 per cent to $24.11, while Aphria Inc. shares fell $1.60 or 10.34 per cent to $13.88. Both were among the top three worst-performing shares on the TSX Friday.

In the U.S., fears of rising inflation sent bond yields higher and contributed to the stock market swoon after the government reported that wages grew last month at the fastest pace in eight years.

The sharp drop follows a long period of unprecedented calm in the market. “We’ve enjoyed low interest rates for so long, we’re having to deal with a little bit higher rates now, so the market is trying to figure out what that could mean for inflation,” said Darrell Cronk, head of the Wells Fargo Investment Institute.

The increase in bond yields hurts stocks in two ways: It makes it more expensive for companies to borrow money, and it also makes bonds more appealing to investors than riskier assets such as stocks.

The Standard & Poor’s 500 index fell 59.85 points, or 2.1 per cent, to 2,762.13. That’s the biggest loss for the benchmark index since September 2016. The S&P 500 has lost 3.9 per cent since hitting a record high a week ago. The Dow Jones industrial average lost 665.75 points, or 2.4 per cent, to 25,520.96. The Nasdaq slid 144.92 points, or two per cent, to 7,240.95. The Russell 2000 index of smaller-company stocks gave up 32.59 points, or 2.1 per cent, to 1,547.27.