Canadian stocks suffered one of their worst days in decades on Thursday, plunging by more than 12 per cent amid a steady stream of negative headlines connected to the new coronavirus.
The S&P/TSX Composite Index fell by 12.34 per cent, or more than 1,760 points, as the chief benchmark for Canadian stocks finished at an approximately four-year low of 12,508.45.
It was one of the steepest falls on record for the S&P/TSX index. The benchmark’s one-day drop was bigger than any it experienced during the global financial crisis a decade ago, and greater than the 11-plus per cent it tumbled during the Black Monday stock-market crash of Oct. 19, 1987. According to data compiled by Bloomberg, it was the biggest one-day decline since May 1940.
Thursday’s wipeout also came just two days after Monday’s almost 10.3 per cent loss for the S&P/TSX, which had at that point been the index’s biggest single-day decline since 1987. So-called circuit breakers were triggered by a sudden drop seen by stocks on Monday and Thursday, a rare development that halted TSX trading briefly on both days just minutes after the opening bell was sounded on Bay Street.
The main culprit behind the losses seen on Thursday and throughout the week is the new coronavirus that continues to spread and disrupt the global economy. The COVID-19 pandemic has brought international travel screeching to a halt, forced professional sports leagues to suspend seasons and even led Canadian Prime Minister Justin Trudeau to place himself in self-isolation and work from home after his wife showed flu-like symptoms.
“You have the two black swan events of the coronavirus and the oil price war happening at the same time,” said Norman Levine, managing director at Toronto-based Portfolio Management Corp. “Black Swan events are rare. I can’t ever remember two of them at the same time.”
The drops this week have killed long-running bull markets and wiped out hundreds of billions of dollars in value. Stock markets in Canada and the United States have also now fallen 20 per cent or more from recent highs, putting them in what is known as bear territory.
Black Swan events are rare. I can’t ever remember two of them at the same time
Norman Levine, Portfolio Management Corp.
There has been widespread damage, with every sector of the S&P/TSX index feeling the pain. Shares of just a single company in the index managed to increase in value on Thursday, those of auto-parts manufacturer Linamar Corp.
Canadian energy companies were also again hit hard on Thursday, as the S&P/TSX Capped Energy Index was off by approximately 16.5 per cent. Oil and gas producers have faced a harsh selloff since last weekend, when Saudi Arabia slashed its crude costs, sparking a price war in energy markets. The battle began after Saudi Arabia and other members of the Organization of the Petroleum Exporting Countries failed to strike a deal with Russia for new production cuts.
“You’re seeing definite levels of panic out there,” Toronto-based money manager John Zechner said Thursday morning. “Panic is what creates bottoms generally, but not necessarily on the first day.”
Amid the market madness, governments around the world have been trying to curb the spread of COVID-19 and weaken its economic sting with various spending plans. Trudeau announced on Wednesday a more-than-$1-billion fund to respond to the virus, but already there are signs more stimulus could be required to really jolt the economy.
Meantime, investors may have a few more rough days ahead of them.
“This could go on for a while, but the intensity of the selling will start to ease, otherwise stock markets will be down to zero in a week or two, and that isn’t going to happen,” Levine said in an email. “It will end when it will end, and absolutely nobody has any idea when, no matter what they may say or predict.”
Financial Post with files from Bloomberg News