Stocks suffered their biggest one-day decline this year in a broad selloff that resembled many of the tumultuous days seen last year, but contrasted with the tame moves so far in 2012.
The Dow Jones industrial average closed at 12,759.15, down 203.66 points or 1.6 per cent. This marked the blue-chip index's first 100-point drop this year. The broader S&P 500 closed at 1343.36, down 20.97 points or 1.5 per cent. Previously, the biggest decline this year was a 0.7 per cent retreat in February. In Canada, the S&P/TSX composite index closed at 12,298.63, down 225.32 points or 1.8 per cent.
There is no shortage of things investors can worry about right now. The declines follow nervousness over a Greek debt swap being undertaken by private bondholders ahead of a deadline on Thursday. As well, Chinese policy makers lowered their target for economic growth to 7.5 per cent from 8 per cent previously, feeding uncertainty about the country's demand for commodities. Recent European economic figures have pointed to a recession in the euro zone.
Meanwhile, it isn't hard to find the encouragement to bail out on stocks after their strong run-up. The Dow Jones industrial average recently topped the 13,000-point threshold for the first time since 2008, while the tech-heavy Nasdaq composite index touched 3,000 for the first time since 2000.
Economically sensitive stocks were by far the worst hit: Financials, industrials, materials and energy stocks led the declines in both Canada and the United States. Among commodity producers, Suncor Energy Inc. fell 4.3 per cent and Canadian Oil Sands Ltd. fell 3.3 per cent after crude oil fell to $104.70 (U.S.) a barrel, down $2.02. Alcoa Inc. fell 4.1 per cent and Teck Resources Ltd. fell 2 per cent.
The rout even hit companies that reported upbeat financial results. Bank of Nova Scotia fell 1.4 per cent after beating earnings expectations and boosting its quarterly dividend. Toronto-Dominion Bank fell 1.6 per cent.
But U.S. financials, many of which have been on a tear this year, were hit harder: Bank of America Corp. fell 3.3 per cent and JPMorgan Chase & Co. fell 2.7 per cent.
Gold was no haven: It fell to $1,672.10 an ounce, down $31.80, dragging producers with it. Barrick Gold Corp. fell 1.4 per cent.
U.S. government bonds remained popular havens for investors seeking shelter. The yield on the 10-year U.S. Treasury bond fell to 1.95 per cent, down 6 basis points (yields fall as bond prices rise). However, many European bond yields rose, with the yield on Italian and Spanish 10-year bonds rising above 5 per cent.