The S&P/TSX composite index fell 233.24 points to 14,227.36, capping a string of losses this week thta were also sparked by the central bank's moves to remove stimulus measures, as well as a stronger U.S. dollar.
The loonie lost 0.35 of a cent to 89.15 cents US as the greenback weighed on the Canadian dollar, despite data showing that the economy created 74,100 jobs last month, far above the gain of 20,000 positions that economists had expected.
U.S. indexes also fell as the Dow Jones industrials gave up the last of its year-to-date gains, falling 115.15 points to 16,544.1. The Nasdaq plunged 102.1 points to 4,276.24, while the S&P 500 index was down 22.08 point to 1,906.13.
Global economic worries deepened this week as German announced big declines in exports, factory orders and production, raising worries that Europe's economic powerhouse could fall back into recession. There is pressure on the European Central Bank to embark on further stimulus moves. But ECB president Mario Draghi made it clear Thursday that governments need to do more on the fiscal side.
Worries about the global economy were already elevated after the International Monetary Fund downgraded its economic forecast this past week, helping push stocks well off the high-water mark that was reached in late summer. The TSX is down 8.6 per dent from its highs, leaving it up 4.44 per cent year to date. The Dow is down 4.25 per cent from its summer highs.
"We have been expecting the proverbial 10-per-cent correction for a long time", said Monika Skiba, senior portfolio manager at Manulife Asset Management.
"We’re overdue for volatility and it seems to be the traditional time of the year when people are revising their estimates and, this week, everybody decided that global growth is not what we would like it to be and there are question marks about all kinds of demand outside the U.S."
There are also jitters on markets about the impending end to the years-long move by the Fed to keep long-term interest rates low. Its third program of quantitative easing, involving the massive purchase of bonds, comes to an end this month. Analysts observe that stocks retreated sharply at the end of the Fed's previous quantitative easing programs, which have been credited for supporting a strong rally on stock markets.
A strong greenback has also hurt sentiment since a rising currency weighs on U.S. exports, the profits of American multinationals and the resource-heavy TSX.
The TSX fell 562 points or 3.8 per cent this week alone, with the energy sector down more than seven per cent as oil retreated to 22-month lows just below the $86 a barrel level. The sector lost 1.8 per cent Friday as the November crude contract in New York inched up a nickel to a 22-month low of US$85.82 a barrel.
Falling railroad stocks helped push the industrial sector down 2.65 per cent.
The gold sector faded 1.8 per cent while December bullion was $3.60 lower to US$1,221.70 an ounce.
The base metals sector dropped 1.45 per cent while December copper was unchanged at US$3.03 a pound.
The Dow industrials fell 2.8 per cent this past week.