Dow plunges nearly 1,200 points as North American market rout deepens

North American stock markets plungedin volatile tradingon Mondayafter theDow Jones index fell almost 1,200 points, following itsworst weekly decline since 2016 on Friday.

Monday was the first time the Dow fell below 25,000 points since Jan. 4. The indexalso sawitslargest daily points dropin its history.

The benchmarkDow Jones Industrial Average lost1,175points and closeddown 4.6per centto24,345.68points. Itwas down more than 1,500 points at one point in the afternoon.

On Friday, it lost 666 points marking thebiggest daily declinesince during the global financial crisis inDecember 2008.

Meanwhile, the S&P 500 lost 4.1per cent to 2,648.96 its biggest daily percentage drop since August 2011. The tech-heavy NasdaqComposite finished down 3.8per cent to6,967.53. The Dow Jones& S&P 500have now erased their gains for this year.

John Zechner, chairman of investment firm J. ZechnerAssociates, said there was definitely some panic selling in the markets, which was to be expected, because markets don't go straight up forever.

"Markets take the escalator up and the elevator down and I think you're seeing a little of that today," he said.

"Money's been flowing at such a rate and people have seen this market as almost an infallible in the past year and everybody is saying at some point you're going to have a rollover."

The financial, energyand industrialsectors were among the biggest losers in the U.S.

Derek Holt of Scotiabank Economics said investors' "fear" in the marketwas the result of several factors.

"First,strained valuations, second,central bank concerns in a week that is full of global central bank decisions; plus a U.S. shutdown risk byThursdayas the debt ceiling suspension draws to a close in a little over a month," he said in a note.

Bond yields

Rising bond yields also continued to weigh onshares as investors worried that signsof rising inflation could make the U.S. Federal Reserve raise interest rates faster than anticipated.

As interest rates rise, the value of existingbondsfalls and borrowing to invest becomes more expensive.

The yield on the10-year U.S. treasury note surgedto2.885 per cent overnight, a four-year high, but fell back to 2.841 per cent in the morning.

RobertKavcicofBMOCapital Markets said in hisnote Monday that despite the sell-off in equities, the rise in treasury yields has notrelented.

"Surging bond yields and the realization that monetary tightening is now a real and more significantfactor," he said.

"This just serves to reinforce our expectation that a March rate hike is coming, and that the three-per-year pace that we have in our forecast right now is probably the starting point."

Canadian shares

The Canadian market fell the most in 17 months, closing down at the lowest level since mid-September.

In Toronto, the S&P/TSX Composite endeddown 1.7per cent to15,334.81points falling for the sixth consecutive day.

It had also lost four per cent lastweek, marking its worst weekly decline since January 2016.

Financials and energy shares weighed on the index asbenchmark U.S. crude fell $1.30to $64.15US a barrel in New York.

Shares of Toronto-Dominion Bank and Bank of Montreal were both down nearly threeper cent.

On the other end, healthcare and the materials sectors were up on Monday after seeing losses for much of last week.

Shares ofAurora Cannabis were up nearly nineper cent afterannouncingthat it would buy20 per centstake in anAlberta liquor store chain.

Weaker loonie

The Canadian dollar tradedat 80.11 US cents, downfrom Friday's average price of 80.78 US cents.

Despite the loonie trading lower in a "risk off" market, Bipan Rai ofCIBC Capital Markets said it does remain less sensitive thanmost other currencies to the global equitiessell-off.

"Global central banks continue to diversify into the Canadian dollar. As of the third quarter of2017, the amount of Canadian dollarreserves owned by central banks hadgrown by 85 per centsince the beginning of 2014," he said.

"Currently, we estimate that central banks own around 30 per centof the domestic sovereign market."

Rest of the world

The majority of Asia's major markets closed down on Monday as Wall Street's sell-off on Friday raised concerns about an overdue correction in equities.

The region's biggest market, Japan's benchmark Nikkei 225 tumbled 2.6 per cent, while Hong Kong's Hang Seng index lost1.1 per cent.

The lone bright spot was Mainland China's Shanghai Composite, which reversed losses to close up0.7 per cent.

In Europe, the benchmark Stoxx 600 finished lower by1.6per cent marking its lowest level since November.It's the sixth consecutive day of losses for the index.

That is the biggest decline for the index since the United Kingdom voted to leave the European Union in June 2016.

German coalition talks heightened concerns of political instability in the region after the country's political parties struggled to form a government.