TORONTO - The Toronto stock market closed sharply lower as early gains in energy and mining stocks disappeared, losses in financials picked up amid a new wrinkle in the restructuring of commercial paper while telecom stocks fell with death of the BCE takeover attempt.
New York markets also weakened considerably due to a new wave of pessimism over the chances of Congressional approval for a bailout package for American carmakers.
Toronto's S&P/TSX composite index tumbled 242.1 points to 8,391.9. The Canadian dollar gained 1.67 cents to 81.06 cents US as the U.S. currency weakened.
The TSX Venture Exchange moved up 7.9 points to 713.44.
New York's Dow Jones industrial average dropped 196.33 points to 8,565.09. The Nasdaq composite index fell 57.6 points to 1,507.88 while the S&P 500 index was off 25.65 points at 873.59.
Prospects for the US$14 billion of loans to cash-starved General Motors Corp. and Chrysler LLC dimmed as opposition from both Democratic and Republican parties increased.
Those opposed are arguing that any support for the domestic auto industry should carry significant concessions from autoworkers and creditors and reject tougher environmental rules imposed by House Democrats.
The House of Representatives has approved the plan to infuse money within days to the two struggling automakers. Ford Motor Co. has said it does not need aid.
"If this doesn't pass, the market would show it wasn't happy with that," said Neil Massa, trader at MFC Global Investment Management.
"There would just be many more people unemployed that would be a drain on society instead of a contribution, and that's never a good thing considering we're in a recession. I can't imagine they'd let that happen."
Auto stocks were hammered in New York: General Motors Corp. fell 49 cents to US$4.11 while Ford lost 35 cents to US$2.90.
The TSX financial sector slipped 3.75 per cent with National Bank (TSX:NA) the biggest loser, down $3.10 or 9.4 per cent to $29.81 and Manulife Financial gave back 97 cents to $18.98.
The slide followed a report that Ottawa could be asked to provide between $5 billion and $10 billion to salvage the restructuring of the seized-up market for Canadian asset-backed commercial paper, or ABCP. The plan has been stalled for months by market upheaval.
Also pressuring financials were comments from JPMorgan Chase CEO Jamie Dimon, who said that November was a "terrible" month for the company.
The energy sector in Toronto gave up early strong gains even as the price of crude in New York ran ahead $4.46 to US$47.98 a barrel, falling two per cent as both Petro-Canada (TSX:PCA) and EnCana Corp. (TSX:ECA) said they are reducing 2009 capital spending - Petro-Canada by about one-third to $4 billion.
EnCana slashed its cash-flow outlook and reduced its capital budget to US$6.1 billion, from $7 billion this year.
PetroCan shares slipped two cents to $28.98, EnCana gave back $4.42 to $55.22 and Canadian Natural Resources (TSX:CNQ) gained $2.10 to $44.75.
Precision Drilling Trust (TSX:PD.UN) surrendered 90 cents to $7.65 after warning it may cut its distributions as financing costs swell for its proposed takeover of Grey Wolf Inc.
The energy sector announcements came as oil prices rose above US$45 a barrel with traders expecting a significant OPEC production cut next week to boost the market. Light sweet crude traded later up $4.46 at US$47.98 a barrel on the New York Mercantile Exchange.
The TSX gold sector gave back 3.25 per cent even as bullion advanced $17.80 to US$826.60 an ounce. Iamgold Corp. (TSX:IMG) was down 22 cents to $5.88 after a friendly deal to acquire Orezone Resources Inc. (TSX:OZN) in an all-stock transaction valued at US$139 million. Orezone shares jumped 34.5 cents or 197 per cent to 52 cents.
Lululemon Athletica Inc. (TSX:LLL) stock fell $4.35 or 33 per cent to $8.80 after reducing its expectations for the holiday quarter and next year - including a drop in same-store sales - "based on the trends in the macro environment and the weaker Canadian dollar."
T-shirt and sportswear manufacturer Gildan Activewear Inc. (TSX:GIL) reported its earnings shrank by almost half in its latest quarter to US$21.4 million, pulled down by a US$26.9-million settlement of a long-running tax dispute. Its stock fell 35 per cent, losing $6.15 to $11.60.
Research In Motion Ltd. (TSX:RIM) has lined up an agreement to acquire Chalk Media Corp. (TSXV:CKM) - which creates and deploys media-rich content delivery to RIM's BlackBerry smartphones - for $23.1 million in cash. Chalk shares soared 8.5 cents or 189 per cent to 13 cents while RIM shares were off $1.99 to $46.59.
After markets closed, Canadian data encryption specialist Certicom Corp. (TSX:CIC.TO) called a takeover offer by RIM "highly opportunistic" and said it "undervalues" Certicom
In the U.S., Procter & Gamble Co. reduced its sales projections because retailers, distributors and consumers are cutting back. And Costco Wholesale Corp. reported a quarterly profit that missed Wall Street projections.
There was also glum news from aerospace company Boeing. It's delaying the first flight of its 787 Dreamliner jet to the second quarter of 2009 because of the recent Machinists' strike and production glitches.
