Stocks ended Tuesday with big losses following a bizarre attack on South Korea by North Korea, while lowered projections from the Federal Reserve pointed to slower economic growth ahead.
The Dow Jones industrial average closed at 11,036.37, down 142.21 points, or 1.3 per cent. The broader S&P 500 closed at 1180.73, down 17.11 points, or 1.4 per cent. In Canada, the S&P/TSX composite index closed at 12,793.75, down 135.26 points, or 1.1 per cent.
North Korea's provocative actions certainly rattled nerves, already frayed over uncertainty in Europe where the debt crisis has forced Ireland to accept financial assistance from the European Union and the International Monetary Fund. Now, some observers are already looking at Spain and Portugal as the next potential areas of crisis.
At the same time, the Federal Reserve sounded awfully cautious in the minutes of its monetary policy meeting in early November. The Fed now believes that the U.S. economy will expand between 2.4 per cent and 2.5 per cent in 2010, down from a June forecast of 3 per cent to 3.5 per cent. The Fed also lowered its forecast for 2011.
The stock market slump - which took shape at the start of trading - was widespread, with all but one stock in the 30-member Dow falling. That one winner was Hewlett-Packard Co., which rose 2.2 per cent after reporting upbeat quarterly results after markets closed on Monday.
Meanwhile, commodity producers and financials led the selloff. JPMorgan Chase & Co. fell 2.3 per cent and Bank of America Corp. fell 1.9 per cent, in a bout of turbulence for the sector related to insider trading investigations and concern about European banks.
Among energy stocks, Exxon Mobil Corp. fell 1.7 per cent and Canada's Suncor Energy Inc. fell 2.7 per cent after the price of crude oil retreated to $81.25 (U.S.) a barrel, down 49 cents.
Materials stocks were also down generally, with Teck Resources Ltd. falling 4.1 per cent and Alcoa Inc. off 1.2 per cent. However, gold rose to $1377.60 an ounce, up nearly $20, as investors moved into perceived safe haven investments. As a result, Barrick Gold Corp. rose 1.7 per cent.
Canadian financial stocks were caught in the downturn, with Manulife Financial Corp. down 3.4 per cent and Toronto-Dominion Bank down 0.8 per cent.