Volatility sends TSX, Dow to new lows

Canada’s main stock index hit a 52-week low Monday amid heightened volatility caused by a steep drop in crude oil prices and investor angst over the spread of COVID-19.

The amount of market volatility is unprecedented, says Michael Currie, vice-president and investment adviser at TD Wealth.

“Thousand-point moves are just becoming the norm now,” he said in an interview.

“A 500-, 600-point move nobody even flinches anymore and those used to be massive days.

Trading on the S&P/TSX composite index was temporarily halted for the third time in the past week after an early 11-per-cent drop or more than 1,800 points triggered a circuit-breaker.

It partially recovered to close down almost 10 per cent or 1,355.93 points at 12,360.40.

In New York, the Dow Jones industrial average had its worst day since 1987 by losing 2,997.10 points or 12.9 per cent at 20,188.52.

The S&P 500 index was down 324.89 points at 2,386.13, while the Nasdaq composite was down 970.28 points at 6,904.59.

The markets fell despite the Federal Reserve over the weekend joining the Bank of Canada in again cutting interest rates, which should have been supportive.

“This is still a market that is pricing in not just a garden variety recession but the possibility of something worse,” said Frances Donald, global chief economist and head of macro strategy for Manulife Investment Management.

That could include protracted weak economic activity that looks like a credit crisis if defaults start to rise.

“We have so little visibility into what the economy will look like next and let’s remember the stock market is trying to get a sense of what earnings will look like,” she said in an interview.

The shape of earnings won’t be known until novel coronavirus cases start to slow.

In the meantime, the TSX is down about 31 per cent from its Feb. 20 high while the S&P 500 is down 30 per cent and the Dow nearly 32 per cent.

The Canadian dollar traded for US71.61 cents compared with an average of US71.94 cents on Friday.

The loonie fell to a four-year low as investors increasingly seek shelter in the U.S. dollar and the Japanese yen. They’re concerned about the economic impact of COVID-19, policy responses in Western Europe and the spread of events, restaurants and stores shutting down in North America, said Tom Nakamura, vice-president and portfolio manager, currency strategy at AGF Investments Inc.

“There’s also market concern about the Canadian economy and whether we have enough policy tools and we have enough fiscal space to be able to combat these kind of dual shocks to our system,” he said.

Materials was the lone of the TSX’S 11 major sectors to gain ground in a broad-based selloff.

The sector was up 2.3 per cent.