Stock markets weaken as commodity prices drop, Best Buy issues profit warning

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(The Canadian Press)

By The Canadian Press

TORONTO - North American stock markets were awash in red as commodities prices continued to decline and electronics retailer Best Buy diminished optimism for U.S. investors when it issued a profit warning.

Toronto's S&P/TSX composite index fell 170.90 points in early trading to 9,253.10, after falling 264.80 points on Tuesday.

The TSX energy sector slipped 2.9 per cent as the price of crude oil continued to fall. Light sweet crude for December delivery was down $2.01 at US$57.32 a barrel on the Nymex.

The gold sector was down 4.5 per cent as the price of bullion fell $8.50 to US$724.30 an ounce on the New York Mercantile Exchange.

On Wall Street, the Dow industrials were down 191.55 to 8,502.41 after falling 177 points Tuesday. The Nasdaq composite index lost 29.15 to 1,551.75 while the S&P 500 declined 17.69 to 881.26.

The TSX diversified metals sector slid 10.6 per cent. Teck Cominco Ltd. (TSX: TCK-B.TO) dropped another seven per cent, or 64 cents, to $8.11. On Tuesday, Teck said that contrary to rumours, it is not planning a stock offering to raise money to pay debt.

The Canadian dollar dropped to 82.21 cents, down 1.37 cents from Monday's official close, before Tuesday's Remembrance Day bank trading holiday.

Finance Minister Jim Flaherty says the federal government will purchase another $50 billion in residential mortgages to ease the credit crunch facing Canadian banks. It follows a similar move last month to purchase up to $25 billion in mortgages.

Retailers continued to erode optimism around the start of the holiday shopping season. Consumer electronics seller Best Buy Co. says it is cutting its 2009 guidance on fears that consumer spending will erode even further.

Department store operator Macy's Inc. says it lost $44 million in the third quarter. U.S. investors are worrying that a severe pullback in consumer spending - which drives more than two-thirds of the U.S. economy - will prolong a global economic slump.

ING Canada Inc. (TSX: IIC.TO) reported a third-quarter profit drop to $57 million from year-earlier $92 million due to stock market volatility. Shares were down 23 cents to $31.60.

Research in Motion (TSX: RIM.TO) debuted its latest challenge to Apple Inc.'s iPhone - the BlackBerry Curve 8900 smart phone, as its shares dropped 93 cents to $53.98.

Fears are growing for General Motors Corp. and the North American-based auto industry in general, with Michigan Gov. Jennifer Granholm calling for quick federal action to help the Detroit Three. Granholm says Washington has thrown $700 billion into the rescue of the financial sector, and the carmakers are "just asking for a fraction of that."

President-elect Barack Obama urged President George W. Bush on Monday to support aid for the struggling automakers. And House Speaker Nancy Pelosi says she's confident Congress would approve "emergency and limited financial assistance" for the industry under the $700-billion bailout measure passed in October.

Treasury Secretary Henry Paulson gives an update on the government's financial rescue package later this morning (at 10:30 a.m. ET).

Overseas, London's FTSE 100 index was down 0.48 per cent in afternoon trading in London. The German DAX fell 2.1 per cent and the Paris CAC-40 lost 1.2 per cent.

The Bank of England predicted inflation will fall below the government's target of two per cent next year as the economy contracts. This raised expectations that the British central bank will lower its benchmark rate - possibly to the lowest level ever.

Japan's Nikkei index closed down 1.3 per cent and Hong Kong's Hang Seng declined 0.7 per cent.