TORONTO -- U.S. stock markets suffered their worst day in more than two years Monday while Canada's main stock index posted a triple-digit decline amid concerns stemming from an increase in new cases of the novel coronavirus outside of China.
The markets plunged in reaction to amplified economic uncertainty caused by outbreaks in more developed countries like Italy and South Korea, said Craig Fehr, Canadian markets strategist, Edward Jones.
He expects markets will continue to be volatile until the virus called COVID-19 is contained or somewhat resolved. He said investors can find solace in the fact that the impact will likely be temporary, although it's unclear how long it lasts.
GDP growth in China and globally will come in lower than previously anticipated and there will probably be a downward revision in corporate earnings. But Fehr doesn't think the virus will be the catalyst for a big downturn in the market.
"I don't think this is the spark that ignites a bear market," he said in an interview.
"I think this could certainly be a correction-level catalyst but at the end of the day the underlying economic fundamentals not only in North America but around the world were more on the uptrend than the downtrend."
The S&P/TSX composite index closed down 280.79 points or 1.6 per cent at 17,562.74, the biggest drop since August.
In New York, the Dow Jones industrial average was down 3.6 per cent by losing 1,031.61 points at 27,960.80. The S&P 500 index was down 3.4 per cent or 111.86 points at 3,225.89, while the Nasdaq composite was down 3.7 per cent or 355.31 points at 9,221.28.
The Canadian dollar traded for 75.31 cents US compared with an average of 75.62 cents US on Friday.
Materials was the lone sector on the TSX to gain as gold prices rose to a new seven-year high. The safe haven trade of the precious metal prevented the Toronto stock market from sustaining the larger losses seen south of the border as miners gained led by Eldorado Gold, whose shares surged 10.2 per cent.
The April gold contract was up US$27.80 at US$1,676.60 an ounce and the March copper contract was down 3.1 cents at US$2.58 a pound.
Health care and energy each lost more than four per cent on the day with Cronos Group Inc. down more than 10 per cent after the cannabis producer announced its quarterly results release will be delayed.
Cenovus Energy Inc. lost 5.4 per cent on weaker crude oil prices caused by renewed demand concerns resulting from the coronavirus.
The April crude contract was down US$1.95 or 3.65 per cent at US$51.43 per barrel and the April natural gas contract was down 7.4 cents at US$1.84 per mmBTU.
Teck Resources Ltd. shares fell 2.7 per cent after the company said it was shelving the US$20-billion oilsands project because of tensions over Indigenous rights, climate change and resource development.
Monday's market weakness comes days after they hit record highs, which also prompted some investors to sell and crystallize profits.
Fehr said some perspective is required when assessing the big downward movement even though all the gains of the year were wiped out in one day on the Dow.
"This is only a small blip on the radar at this stage, but because the fundamental backdrop is not at this stage permanently impaired by this, I think investors can have some confidence that this is maybe not a one day pullback but that this is probably more short-term than long-term in nature."
