Stocks tumble on weak bond auction in Spain

The S&P/TSX composite index dropped 144.95 points to 12,178.66 on top of a 184-point plunge Tuesday, led by sliding resource stocks as prices for oil, copper and gold registered steep declines.

The TSX Venture Exchange fell 46.49 points to 1,499.14.

The commodity-sensitive Canadian dollar fell 0.61 of a cent to 100.36 cents US.

Losses piled up amid a disappointing auction of government debt in Spain. Bond yields there shot up to a near three-month high, a signal that investor confidence in Spain’s finances is weakening. Spain announced tax increases and budget cuts last week.

“European countries face a lot of tough choices and investors are watching the situation there carefully,” said John Manley, chief equity strategist for Wells Fargo Advantage Funds in New York.

“It’s like when cockroaches appear, you’re never quite sure how many are out there.”

The Dow Jones industrials fell 124.8 points to 13,074.75.

The Nasdaq composite index lost 45.48 points to 3,068.09 while the S&P 500 index dropped 14.42 points to 1,398.96.

Markets also fell as Fed policy-makers said they were worried that recent strong gains in hiring could fizzle if U.S. economic growth doesn’t pick up.

However, the minutes of the Fed’s March 13 meeting showed that only a couple of members wanted to take further steps to boost the economy.

There have been some hopes recently that the Fed would authorize another bond buying program, known as quantitative easing. Much of the money that’s been pumped in over the past few years has ended up in financial markets, notably boosting stocks and commodities.

“There was an initial euphoria a week or so ago when (another round of stimulus) was on the table, which meant more liquidity into the markets,” said Chris Kuflik, wealth adviser at ScotiaMcLeod in Montreal.

“Markets are taking away the gains that were based on hope of more liquidity coming in now that it seems the U.S. doesn’t seem to want to inject more liquidity.”

Kuflik added that what is more important is the upcoming slew of first-quarter corporate earnings, which start coming out in the U.S. next week “because that is what will drive stock prices.”

Markets seemed unaffected by a report showing that the U.S. private sector created 209,000 jobs in March. The data from payrolls processor Automatic Data Processing Inc. was close to analysts’ expectations.

The report came out two days before the release of the U.S. non-farm payrolls report for March. Economists expect the data to show the economy cranked out a total of 210,000 jobs last month.

Meanwhile, the Institute for Supply Management’s non-manufacturing purchasing managers index showed the service sector expanding, but at a slower pace. It came in at 56, lower than the 56.6 reading that economists expected.

The disappointment with the Fed minutes comes at a time when most stock markets have racked up steady advances through the first quarter as a string of U.S. reports, particularly employment data, have reinforced the view that the recovery continues at a slow but steady pace. The U.S. economy has added at least 200,000 jobs in the last three months while manufacturing data, such as the ISM’s index, have beat expectations.

Gold stocks were the biggest losers as commodity prices racked up big losses.

The gold sector lost about 3.5% as bullion prices fell heavily, down $57.90 to US$1,614.10 an ounce. Goldcorp Inc. (TSX:G) was $2.12 lower to $40.98 and Barrick Gold Corp. (TSX:ABX) faded $1.37 to $41.16.

The base metals component fell 2.11% as the May copper contract in New York lost 13 cents to US$3.79 a pound. Ivanhoe Mines (TSX:IVN) declined 28 cents to $14.09 and First Quantum Minerals (TSX:FM) dropped 72 cents to $18.38.

The May crude contact on the New York Mercantile Exchange closed down $2.54 to US$101.47 a barrel, pushing the energy sector 2.75% lower.

Prices were also pressured by a report showing a larger than expected increase in U.S. crude supplies, which suggested demand may remain weak.

The Energy Information Administration reported an increase in crude stockpiles by nine million barrels in the week ended March 30. That contrasted with expectations of an increase by 1.9 million barrels.

Cenovus Energy (TSX:CVE) shed $1.27 to $34.21 while Canadian Natural Resources (TSX:CNQ) lost 45 to $32.71.

Railway stocks fell alongside commodity stocks as Canadian Pacific Railway (TSX:CP) shed 92 cents to $75.34.

The tech sector lost almost one per cent with shares in Research In Motion Ltd. (TSX:RIM) closing down 21 cents at $12.70 after earlier hitting a fresh, 52-week low of $12.57. It is also the stock’s lowest level since late 2003.

In corporate news, Rona Inc. (TSX:RON) has denied that the company is up for sale after stock in the home renovation retailer jumped more than 12% in heavy trading Tuesday on the Toronto Stock Exchange.

The Quebec-based retailer issued the denial in response to movement in its stock after Robert Hull, chief financial officer of Lowe’s Companies Inc., said his U.S.-based rival might be interested if Rona put itself up for sale. On Wednesday, Rona shares lost 13 cents, or 1.24%, to $10.35.

Yahoo is laying off 2,000 employees as part of the latest plan to turn around the beleaguered Internet company. The cuts represent about 14% of the 14,100 workers employed by Yahoo. Its shares added nine cents to US$15.27.