TSX plunges as economic worries take big bite out of commodity stocks

TORONTO - The Toronto stock market plunged about 300 points late Monday morning in a broadbased selloff led by commodity stocks amid fresh worries about an economic recovery.

The S&P/TSX composite index fell 318.3 points or just over three per cent to 9,964.8. The energy sector was a leading loser, down almost five per cent, as the August crude contract on the New York Mercantile Exchange lost $2.22 to US$64.51.

The slide in oil prices followed a 3.5 per cent retreat last week on the growing belief that the economy won't be strong enough to lift demand as much as expected.

Sector heavyweight EnCana Corp. (TSX:ECA) lost $2.10 to $53.25 while Suncor Inc. (TSX:SU) gave back $2.37 to $30.48.

The Canadian dollar was down 0.05 of a cent to 86.03 cents US.

The dismal performance on the TSX comes after the main index sustained a one per cent decline last week with investors getting particularly discouraged following a much worse than expected U.S. employment report.

The June non-farm payrolls report said 467,000 Americans lost their jobs during the month, driving the U.S. unemployment rate up to a 26-year high of 9.5 per cent.

"I'm just taking this as part of the correction or moves we were bound to see in a market that was steadily progressing upwards," said Michael Smedley, portfolio manager at Morgan Meighen and Associates.

"In the Canadian context, of course, it is a particularly resources and particularly mining-focused uptrend we have been in."

Canada's own unemployment numbers are to be released Friday. They are expected to show job losses of around 30,000 last month. The country has lost 363,000 jobs since last October.

The TSX Venture Exchange moved 28.96 points lower to 1,064.

New York markets were also lower as a trade group's measure of the health of the U.S. services sector contracted less than expected in June.

The Dow Jones industrial average lost 43.2 points to 8,237.5 on top of a two per cent slide last week.

The Nasdaq composite index stepped back 22.52 points to 1,774 while the S&P 500 index was down 6.35 points to 890.05.

The Institute for Supply Management's services index read 47 in June, up from 44 in May. Economists polled by Thomson Reuters had expected a reading of 45.5 last month.

It was the best showing since September when the index was at 50, the sawoff point between growth and contraction.

Uncertainty about company profits in the second quarter and forecasts for rest of the year, to be released in the coming weeks, also have many investors on edge. U.S. aluminum giant Alcoa Inc. opens earnings season on Wednesday.

There are no Canadian economic reports out Monday. Elsewhere on the TSX, the base metals sector gave up six per cent as the price of copper on the Nymex declined six cents to US$2.23 a pound.

Teck Resources Ltd. (TSX:TCK.B) were down 72 cents to $19.27. The company said Monday it had secured shipment rates to transport coal from its mines in southern British Columbia to ports in the Vancouver area.

The Vancouver-based mining giant said it had negotiated rates with Canadian Pacific Railway Ltd (TSX:CP) for the 2009 coal year beginning April 1. Details of the negotiations were not disclosed.

Anglo-Australian miner Rio Tinto has sold a division of its Alcan unit as it continues to reduce debt. It is selling its Alcan Packaging Food Americas division to U.S.-based Bemis Company Inc. for US$1.2 billion. Rio incurred significant debt in its 2007 purchase of Canadian aluminum giant Alcan Inc., which was based in Montreal, for $38 billion. In New York, Rio Tinto shares fell 7.9 per cent to US$145.97.

Silvercorp Metals Inc. (TSX:SVM) says Klondex Mines Ltd. (TSX:KDX) is urging shareholders to reject a $70 million takeover bid. The Vancouver-based company says Klondex has completed a $3 million private placement by issuing shares to Chinese company, and alleges the move violates terms of the offer. Silvercorp shares fell 13 cents to $3.81.

The August bullion contract in New York moved down $9.60 to US$921.40 an ounce, taking the gold sector down 4.8 per cent. Barrick Gold Corp. (TSX:ABX) fell $1.86 to $37.85.

Non-commodity sectors also suffered with the financial group down two per cent. Scotiabank (TSX:BNS) declined 83 cents to $42.87.

Industrial stocks also took a hit with Canadian Pacific Railroad (TSX:CP) down $2.87 to $42.38.

In other corporate news, a bankruptcy judge says that General Motors Corp. (NYSE:GM) can sell the bulk of its assets to a new company, potentially clearing the way for the automaker to emerge from bankruptcy protection.

WestJet shares were down 33 cents to $10.47 as the carrier reported that its passenger traffic in June fell by 7.1 per cent from the year-earlier period. The load factor was 72.9 per cent - down from 76.5 per cent in June 2008.

Pet supply retailer Pet Valu Inc. (TSX:PVC) is to be acquired by Atlanta-based private equity firm Roark Capital Group for $143.7 million. The board has recommended acceptance of the deal. Its shares ran ahead 41 cents to $13.46.

Overseas, Asian stocks were narrowly mixed Monday, undermined by investor anxiety that company earnings will reflect a weaker global economy than originally hoped.

Japan's Nikkei 225 stock average fell 150.14, or 1.5 per cent, to 9,665.93, while Hong Kong's Hang Seng edged up 0.1 per cent to 18,221.78.

London's FTSE 100 index lost 1.05 per cent, Frankfurt's DAX and Paris CAC 40 gave back 1.5 per cent.