TSX has biggest one-day decline since 1940

Canadian stocks suffered one of their worst days in decades on Thursday, plunging by more than 12 per cent amid a steady stream of negative headlines connected to the new coronavirus.

The S&P/TSX Composite Index fell by 12.34 per cent, or more than 1,760 points, as the chief benchmark for Canadian stocks finished at an approximately four-year low of 12,508.45.

It was one of the steepest falls on record for the S&P/TSX index. The benchmark’s one-day drop was bigger than any it experienced during the global financial crisis a decade ago, and greater than the more than 11 per cent it tumbled during the “Black Monday” stock-market crash of Oct. 19, 1987. According to data compiled by Bloomberg, it was the biggest one-day decline since May 1940.

Thursday’s wipeout also came just two days after Monday’s almost 10.3-per-cent loss for the S&P/TSX, which had at that point been the index’s biggest single-day decline since 1987.

So-called circuit breakers were triggered by a sudden drop seen by stocks on Monday and Thursday, a rare development that halted TSX trading briefly on both days just minutes after the opening bell was sounded on Bay Street.

The main culprit behind the losses seen Thursday and throughout the week is the new coronavirus that continues to spread and disrupt the global economy. The pandemic has brought international travel screeching to a halt, forced professional sports leagues to suspend seasons and even led Canadian Prime Minister Justin Trudeau to place himself in self-isolation and work from home after his wife showed flu-like symptoms.

“You have the two Black Swan events of the coronavirus and the oil price war happening at the same time,” said Norman Levine, managing director at Toronto-based Portfolio Management Corp. “Black Swan events are rare. I can’t ever remember two of them at the same time.”

You’re seeing definite levels of panic out there. ... Panic is what creates bottoms generally, but not necessarily on the first day.

The drops this week have killed long-running bull markets and wiped out hundreds of billions of dollars in value. Stock markets in Canada and the United States have also now fallen 20 per cent or more from recent highs, putting them in what is known as “bear” territory.

There has been widespread damage, with every sector of the S&P/ TSX index feeling the pain. Shares of just a single company in the index managed to increase in value on Thursday, those of auto-parts manufacturer Linamar Corp.

“You’re seeing definite levels of panic out there,” Toronto-based money manager John Zechner said Thursday morning. “Panic is what creates bottoms generally, but not necessarily on the first day.”