Stocks plummet on fears pandemic slump won’t be ending soon

TORONTO — Canada’s main stock index followed other North American markets sharply lower on Thursday, extending its losses amid concerns about how quickly the economy can rebound from the COVID-19 pandemic.

The S&P/TSX composite index closed down 650.41 points — more than four per cent — at 15050.92 on Thursday after dropping 132.41 points on Wednesday.

American stock exchanges were hit even harder.

In New York, the Dow Jones industrial average was down 6.9 per cent, or 1861.8, at 25128.17.

The S&P 500 index plunged 5.9 per cent, or 188.04 points, at 3002.10. The Nasdaq composite fell 5.3 per cent, or 527.62 points, at 9492.73.

Market observers say a rally in the markets since late March wasn’t justified given the dire state of the economy.

On Wednesday, the U.S. Federal Reserve warned the road to recovery from the worst downturn in decades would be a long one.

“The [Toronto Stock Exchange] market is taking it on the chin. [Wednesday] wasn’t a particularly great day either,” said Les Stelmach, portfolio manager at Franklin Templeton Canada.

“I think [Thursday], it’s really a bit of an unwinding of some of that enthusiasm from [last] Friday and Monday that particularly for some of the energy stocks was off the charts in terms of positive movement in stock prices on really very little news.”

The energy sector led the Toronto market lower with a slide of almost 10 per cent.

The selloff involved some of the country’s biggest oilsands producers, with Canadian Natural Resources Ltd. down 10.7 per cent, Suncor Energy Inc. off by 8.4 per cent and Cenovus Energy Inc. down 10.8 per cent.

The July crude oil contract was down $3.26 US at $36.34 US per barrel, while the July natural gas contract was up 3.3 cents at $1.81 US per mmBTU.

Other sectors also struggled in what turned out to be a widespread selloff. Health care fell by 8.6 per cent and the metals and mining sector was down 8.4 per cent.

“It’s the level of uncertainty out there,” said Stelmach.

“There are so many variables and people just don’t have a really good handle on what these things mean for the economy.”

The selling comes as coronavirus cases rise in the U.S. amid the lifting of stay-athome and business closure orders. Total U.S. coronavirus cases surpassed two million on Wednesday.

The Canadian dollar traded for 73.78 cents US on Thursday compared with 74.68 cents US on Wednesday.

Stemach pointed out that the materials sector fell despite a strong rise in the price of gold, with the August gold contract up $19.10 US at $1,739.80 US an ounce.

Meanwhile, the July copper contract was down seven cents at $2.59 US a pound.