The Toronto market lost 226.97 points to 14,893.57, led by declines in energy and financial stocks.
The big drop is the fifth straight decline for the Canadian market and takes the TSX below 15,000 for the first time since late June. However, the S&P/TSX composite is still up nearly nine per cent so far this year.
"Investors in Canada, over the near term have, become complacent because the Canadian market has outperformed," said Brian Belski, chief investment strategist for BMO Capital markets.
"The issue when stocks go up is that you're believing it more, and now all of a sudden Canadian stocks are receiving a dose of reality."
The Canadian dollar fell 0.41 of a cent to 90.03 cents US, pressured by lacklustre commodity prices. The November crude oil contract dipped 27 cents to US$92.53 a barrel, while December gold bullion added $2.40 to US$1,221.90 an ounce and December copper fell two cents to US$3.03 a pound.
The sell-off was even worse on Wall Street, with indexes ending the day with the steepest drop in two months. The Dow Jones industrials fell 264.26 points to 16,945.80, while the Nasdaq plunged 88.47 points to 4,466.75 and the S&P 500 index lost 32.31 points to 1,965.99.
Belski said some of the downward pressure could be attributed to profit-taking, but mostly, the markets are just pulling back from the recent highs.
"We really feel that the momentum trade, especially in the energy and materials space, has really skewed prices to the upside so far this year," Belski said. "Now the resulting momentum shift is turning the other way."
Financial stocks were among the biggest decliners on the Toronto exchange, down 2.18 per cent. Out of the country's five biggest banks, CIBC suffered the biggest loss, as its shares took back 3.27 per cent, or $3.43, to $101.53.
The moves lower came amid signs the U.S. economic recovery remains precarious.
The U.S. Labor Department said weekly unemployment benefit applications rose 12,000 to a seasonally adjusted 293,000, while business orders for long-lasting manufactured goods fell by a record 18.2 per cent in August, dragged lower by a plunge in demand for commercial aircraft.
Shares in Apple (Nasdaq:AAPL) sank nearly four per cent, or $3.88 to US$97.87, a day after the tech company pulled the latest software update for its iPhone software after customers complained about dropped calls. Rival Blackberry (TSX:BB) also saw its stock fall more than six per cent, or 73 cents, to $10.88. The Waterloo, Ont., company unveiled its latest smartphone, the Passport, on Wednesday and is scheduled to release earnings on Friday.
Meanwhile, shares in Valeant Pharmaceuticals (TSX:VRX) were up more than three per cent or $4.37 at $141.66 on the Toronto Stock Exchange.
The Canadian drugmaker said Thursday that Jeffrey Ubben, founder, chief executive and chief investment officer of health care investment manager ValueAct Capital, would join the company's board on Oct. 1. ValueAct president Mason Morfit had sat on the board until earlier this year when he stepped down citing other commitments.
Valeant has been actively pursuing a takeover bid for Botox-maker Allergan maker. The Irvine, Calif., based company has already rejected several acquisition bids from Valeant, the latest offer amounting to about US$53 billion.
Retailer Sears Canada (TSX:SCC) says its chief executive, Douglas Campbell, intends to resign and return to the United States by the end of this year to tend to personal family issues. Campbell had headed the struggling company for about a year after its last CEO, Calvin McDonald, announced he was leaving the company in the midst of a three-year turnaround plan. Shares in the company were up 10 cents at $12.75.
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