The S & P / TSX Composite Index closed 335.82 points lower at 20,154.54 after hitting an intraday low of 19,932.19.
In New York, the Dow Jones Industrial Index lost 614.41 points to 33,970.47. The S&P 500 Index lost 75.26 points to 4,357.73, while the Nasdaq Composite lost 330.07 points to 14,713.90.
Investors are wary of an economic slowdown in China, with concerns Monday about the potential insolvency of Chinese real estate developers, especially Evergrande, said Craig Fehr, investment strategist, Edward Jones.
The fear is that a potential collapse there could set off a chain reaction in China’s real estate development industry and spill over into the wider financial system, in the same way that the Lehman Brothers failure ignited the 2008 financial crisis and the Great Recession.
“All of this is happening (…) at the same time as the Fed is trying to reduce some of the stimulus, which adds a bit to the indigestion today,” he said in an interview.
Fehr said the market move was not a sign of a broader change of direction for North American or global economies. Monday’s Canadian election and the US debt ceiling debate likely also contributed to short-term anxiety, although he said expectations are for Trudeau’s Liberals to retain power with a minority government.
Markets have fallen victim to their own success, with equity markets surging over the past year, approaching a 20% rise before the recent slowdown, he said.
Periodic setbacks are normal even for the strongest stock markets, and the market hasn’t seen typical annual corrections for at least a year.
“I don’t think it’s going to snowball into something serious or prolonged. But I think it’s a condition we’ve been expecting for some time, ”Fehr said.
Monday’s market losses spark more emotion among investors who were spoiled by the large gains, but the declines probably look worse than they actually are, he added.
“The first thing investors can do on a day like this is not take the hook. In other words, don’t panic. “
The top 11 sectors of the TSX were down that day, led by healthcare, energy, industrials, financials and technology.
Healthcare fell 5%, cannabis producer Canopy Growth Corp. losing 7.5%, followed by Aurora Cannabis Inc. down 7.3% and Tilray Inc. down 6.8%,
Energy lost 2.8 percent due to falling crude oil and natural gas prices, Enerplus Corp. and MEG Energy Corp. down 4.8 and 4.7 percent, respectively.
The November crude contract was down US $ 1.68 to US $ 70.14 per barrel and the October natural gas contract was down 12 cents to US $ 4.99 per mmBTU.
A 23.6 percent drop in shares of New Flyer Industries Inc. knocked industrialists down 1.8 percent, while Hut 8 Mining Corp. lost 12.3 percent to 1.5 percent drag technologies.
Falling copper prices pushed materials lower, even though gold was one of the few assets to gain traction.
The December gold contract was up US $ 12.40 to US $ 1,763.80 per ounce and the December copper contract was down 13.2 cents to US $ 4.11 per ounce. delivered.
Fehr said it was not unusual for cyclical investments such as energy, industrials and financials to be hit the hardest on days like Monday, while the loonie is a cyclical currency that underperforms when global growth prospects are weakening and crude prices fall.
The Canadian dollar was trading at 77.95 cents US, from 78.61 on Friday.