TSX, Dow continue slide on weak economic news

A round of dismal economic numbers out of the U.S. and worries about the world economy hammered Toronto and New York markets Wednesday.

The Dow Jones industrial was down 173.58points to 16,141.61, after being off more than 400 points earlier in the day.The broader-based S&P 500 was down 34 points to 1843 on Wednesday afternoon.

The sell-off erased the stock market's gains for 2014. It pushed the Nasdaq composite toward a correction. And it sent investors scrambling for the safety of U.S. government bonds.

"It's a function of the U.S. being the best house in a bad neighbourhood," said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management. "There's still uncertainty about economic growth, primarily on a global basis."

"This was a disappointing report any way you slice it.," said TD economist Ksenia Bushmeneva.

• TSX down 10% since September, an official correction

"The more sombre consumer mood was telegraphed in September's decline in consumer confidence. Moreover, weaker September auto sales and lower gas prices at the pumps were also expected to weigh on nominalretailsales," she said in a note to investors.

Bushmeneva said the number does cast doubt on the forecast of strong growth in the U.S.this quarter.

"Given the robust pace of job creation, we do not expect weakness inretailsales to be longlasting. That being said, September's disappointing reading does represent a modest downside risk to real GDP forecast of 3.4 per cent(annualized) for the third quarter," she said.

Rally at the end of the day

U.S. businesses increased inventories by 0.2 per cent in August, the smallest amount in a year, further data that suggest the economy is not maintaining its momentum.Growing inventories are considered a sign of confidence among business leaders.

The Dow bounced off a 400-point drop after 2 p.m., when the Federal Reserve delivered some better economic news.

Itslatest survey of business conditions shows that six of its 12 regions Cleveland, Chicago, St. Louis, Minneapolis, Dallas and San Francisco reported "moderate" growth. Five others described growth as "modest," and one Boston described activity as mixed.

The report depicted an economy moving ahead steadily but not at a pace that would prompt the Fed to accelerate its timetable for raising interest rates.

That was enough to send stock prices higher.

In Canada, the falling price of oil, with West Texas Intermediate contracts trading at $81.31 US a barrel in New York, weighed on stocks.

The TSX energy sector plunged 19 per cent over the last month. It was down another 1.4per cent Wednesday and led TSX decliners. Talisman and Suncor were hit hard.

In the U.S., news that the AbbVie/Shire merger might fall apart also worried investors.

Markets have seen two weeks of turmoil caused by concern about slowing growth of economies around the world.

Andy Busch, a veteran market watcher and editor of the Busch Update, says he`s watching both oil price and global economic numbers.

However he was encouraged by the rally at the end of the day, he said in an interview with CBC's The Exchange with Amanda Lang.

"Now we`re in a spot where a healthy correction has happened eight per cent,10 per cent, around there Today was interesting...the moves in bonds were crazy today and yet we saw that massive rally at the end of the day, bonds sold off, stocks rallied," Busch said.

"If we get a close above yesterday`s close, I`d say we`re going to stabilize here."