New data showing the eurozone has fallen back into recession further discouraged buyers.
The S&P/TSX composite index was off the worst levels of the session but still down 118.41 points to 11,811.38, a day after a 205-point tumble left the index in negative territory for the year. The TSX is down 144 points year to date.
The TSX Venture Exchange fell 35.99 points to 1,222.7.
The Canadian dollar gained 0.25 of a cent to 99.87 cents US after the U.S. Federal Reserve indicated further quantitative easing could be on the way. This involves the U.S. central bank printing more money in order to buy up bonds.
On the economic front, Statistics Canada said manufacturing sales rose 0.4 per cent in September to $49.8 billion, reflecting higher production in the aerospace industry and higher sales of primary metals.
U.S. markets were negative as the Dow Jones industrials stepped back 28.57 points to 12,542.38. The Nasdaq was 9.87 points lower to 2,836.94 and the S&P 500 index slipped 2.17 points to 1,353.32.
North American indexes racked up substantial losses Wednesday in the wake of a news conference by President Barack Obama, where he made it clear that higher taxes on upper income earners will have to be part of any agreement to deal with the huge U.S. deficit.
The fiscal cliff refers to a series of tax cuts from the Bush era due to expire at the first of the year, raising tax bills for almost all Americans. Combined with huge spending cuts also automatically set to take effect, this which would take a huge chunk out of U.S. gross domestic product and likely push the American economy back into recession, taking other countries’ economies with it.
Such a scenario is bad news for a resource-heavy market like Toronto’s as slowing economies in other countries will slash demand for oil and metals, putting pressure on mining and energy stocks.
The TSX has fallen 4.4 per cent over the past seven sessions to a two-month low after the results of the U.S. election essentially left the political landscape unchanged, making it clear it would be difficult to arrange a compromise in Washington.
"Obviously, what’s happened is people are just sort of looking at the market and saying, I have so (few) gains this year, I better book them now, I can’t take the risk if these people can’t come together on this fiscal cliff," said John Stephenson, portfolio manager at First Asset Funds Inc.
"I believe they will eventually and there will be a compromise because it would be so idiotic for them to drive the economy of the U.S. off the cliff. But people are so nervous they may do this, that they’re not willing to sit around and wait."
Losses have been even worse in New York as American investors have sold off across all sectors on the expectation of having to pay higher dividend and capital gains taxes at the beginning of the year. The Dow has plunged 5.3 per cent since the morning after the election.
Worries about the health of the global economy intensified Thursday after official figures showed that the worsening debt crisis resulted in the eurozone contracting by 0.1 per cent in the July-to-September period from the quarter before as its economies, including those of Germany and the Netherlands, suffer from falling demand. That followed a 0.2 per cent pullback in the previous quarter for the 17-country monetary union.
The gold sector led decliners as gold prices and stocks headed lower amid data showing global gold demand fell in the third quarter as investors bought fewer bars and coins and buyers in China held back because of the economic slowdown. The World Gold Council said about 1,085 tonnes of gold was sold worldwide in the three months through September, down 139 metric tons, or 11 per cent, from a record 1,223.5 tonnes in the same period of 2011.
December bullion fell $16.30 to US$1,713.80 an ounce and the gold sector lost about 2.7 per cent as Goldcorp Inc. (TSX:G) faded $1.36 to C$39.93 while Iamgold Corp. (TSX:IMG) fell 17 cents to $11.81 on top of a 19-per cent plunge Wednesday after the miner delivered a disappointing earnings report.
The base metals sector was down one per cent even as December copper was up one cent at US$3.46 a pound. Thompson Creek Metals (TSX:TCM) was down 17 cents at C$2.91 while Turquoise Hill Resources (TSX:TRQ) gave back 16 cents to $7.60.
The energy sector was down 0.6 per cent as the December crude contract on the New York Mercantile Exchange shed early gains and dropped 87 cents to US$85.45 a barrel on demand concerns. Canadian Natural Resources (TSX:CNQ) was down 37 cents to C$27.37.
The non-resource sectors also racked up losses with the utilities group 2.55 per cent lower with Just Energy Group (TSX:JE) down 46 cents to $8.42.
Industrials also weighed on the TSX with Bombardier Inc. (TSX:BBD.B) falling 20 cents to $2.99.
The financials group was down 0.75 per cent as CIBC (TSX:CM) gave back 77 cents to $76.70.
Traders also digested dull news from the world’s biggest retailer.
Wal-Mart Stores Inc. said third-quarter profit rose nine per cent to US$3.64 billion, or $1.08 a share while sales rose 3.4 per cent to $113.2 billion. Wal-Mart beat earnings expectations by a penny but analysts had expected revenue of $114 billion and its shares fell 3.63 per cent in New York.
A major TSX loser was Poseidon Concepts Corp. (TSX:PSN), a service company in the oil and gas sector. Its shares plunged $8.22 or 62.18 per cent to $5 on very heavy volume of 24.6 million shares after the company reported weaker quarterly results and reduced 2012 earnings and spending guidance.