Markets off sharply on economic news, falling oil

Stock markets in Canada and the United States sold off sharply on Monday amid continuing poor economic news, weakness in corporate finances and falling oil prices.

The S&P/TSX composite index closed down 435.51 points, or more than five per cent, at 7,687.51. Earlier in the trading session, the index lost more than 500 points.A man bundled against a cold Toronto wind passes an electronic board marking the drop in the TSX on Monday. (Robin Rowland/CBC)

The drop in equities came after Statistics Canada said the economy contracted at a 3.4 per cent annualized rate in the fourth quarter of 2008. Economists said the first quarter of 2009 could be even worse.

Adding to the weakness in Canadian stocks was a big decline in the price of a barrel of oil. Light, sweet crude for April delivery closed down $4.61 at $40.15 US a barrel.

The energy stocks sub-group of the TSX shed 8.3 per cent, while financial services lost 4.4 per cent. The materials group dropped 6.7 per cent, while the mining group lost 6.3 per cent on the day.

Dow dives below 7,000

On Wall Street, the Dow Jones industrial average fell below 7,000 for the first time since Oct. 28, 1997. The Dow finished with a loss of 299.64 points at 6,763.29.

The broader S&P 500 dropped 34.27 points to close at 700.82, while the technology stock-laden Nasdaq composite fell 54.99 points, ending at 1,322.88.

The market tumble came after American International Group said it lost $61.7 billion US in the fourth quarter, the biggest quarterly loss in U.S. corporate history. AIG shares finished unchanged a 42 cents on Monday.

Meanwhile, shares of influential General Electric fell 91 cents, or more than 10 per cent, to close at $7.60. On Friday, GE said it was cutting its third quarter dividend by 68 per cent to save the struggling conglomerate $9 billion US a year.