TSX tumbles 393 points on way to 1st close below 13,000 since March;NY also falls

TORONTO - The Toronto stock market headed for its first close below the 13,000-mark since just before Easter Thursday afternoon as the TSX plunged almost 400 points in a broad decline led by commodity shares.

New York markets were also deeply in the red following glum economic and retail data.

Toronto's S&P/TSX composite index was down 393.43 points or three per cent at 12,744.29 after losing 633 points or 4.5 per cent in the previous two sessions.

New York's Dow Jones industrial average lost 304.1 points to 11,228.78.

The Canadian market benchmark is down about 15 per cent from its most recent high from mid-June, when investors were still piling into energy and metals stocks as investors thought commodity demand would remain high despite a weakening American economy.

But energy and mining stocks have declined sharply because of worries about slowing economic conditions, while a stronger U.S. dollar has helped push commodity prices lower.

"Investors have realized that the decoupling story, where non-U.S. economies would remain strong in the face of a weaker U.S. economic environment, that in fact it hasn't come to pass, that in fact U.S. economic weakness has been exported to the rest of the world," said Paul Taylor, chief investment officer at BMO Harris Private Banking.

"And investors have woken up to that recently, causing oil and other commodity prices to ease off fairly dramatically, and obviously equity prices follow that."

On the Toronto market, the energy sector was down almost four per cent as crude oil moved lower for a third day. The October crude contract on the New York Mercantile Exchange was down $1.72 to US$107.63 a barrel after losing more than $6 over the last two days.

The decline in crude came even as the U.S. Energy Department said crude oil supplies dropped by 1.9 million barrels last week, against expectations of a climb of 500,000 barrels. Gasoline inventories fell one million barrels; economists had predicted a slide of 1.8 million barrels.

Losers included sector heavyweight EnCana Corp. (TSX:ECA), which fell $3.43 or 4.7 per cent to $70.01 and Suncor Energy Inc. (TSX:SU) lost $2.26 or 4.2 per cent to $51.28.

Although commodity stocks led the decline, all sectors were lower and the TSX was further depressed by a the industrial sector, which was down 4.5 per cent.

Shares in transportation equipment giant Bombardier Inc. (TSX:BBD.B) fell 72 cents or 8.5 per cent to $7.68 even as it reported that second quarter net income jumped to US$246 million, up from a $71-million loss a year ago. Revenue increased 22 per cent to US$4.93 billion but the firm also warned that orders for its business jets will slow in the coming months.

The TSX Venture Exchange was 18.89 points lower to 1,856.01.

The Canadian dollar moved down 0.21 cent to 94.04 cents US.

The Nasdaq composite index fell 64.35 points to 2,269.38 while the S&P 500 index lost 33.35 points to 1,241.63 after the U.S. Labour Department reported that new applications for unemployment insurance rose last week to a seasonally adjusted 444,000, up 15,000 from the previous week. Economists had expected a slight drop, and the report reversed three weeks of declines.

The report came a day before the U.S. and Canadian unemployment statistics for August.

Base metals stocks also continued to weaken, with the sector down 4.75 per cent.

Teck Cominco (TSX:TCK.B) moved down $2.72 to $38.18 and HudBay Minerals (TSX:HBM) gave back 45 cents to $8.80.

The financial sector lost two per cent as Royal Bank (TSX:RY) fell $1.49 to $48.15 and Scotiabank (TSX:BNS) gave back $1.19 to $47.25.

In takeover news, Borealis Infrastructure Management, a unit of the $52-billion Ontario Municipal Employees Retirement System, is offering $2 billion for Teranet Income Fund (TSX:TF.UN). Borealis is bidding $11 per unit in cash for the Ontario land registry operator and Teranet units were ahead $1.79 to $11.15.

MDS Inc. (TSX:MDS) again reduced its full-year revenue and profit outlook while reporting a quarterly net loss of $10 million. Net revenue declined three per cent from a year earlier to $298 million and its shares fell 85 cents to $14.88.

First Calgary Petroleums Ltd. (TSX:FCP) has disclosed it received proposals to buy the company. The announcement followed a trading halt after its shares spurted up 40 per cent Wednesday. On Thursday, its shares moved down 39 cents to $2.93.

Wal-Mart Stores was a bright spot on Wall Street while many other large U.S. store operators rang up sluggish August sales.

The world's biggest retailer said groceries and back-to-school products helped its August same-store sales rise three per cent, beating expectations and sending its shares up 70 cents to US$60.49.