Canadian shares slide to lowest close in almost 8 weeks

Canadian shares fell Tuesday, taking the S&P/TSX Composite Index to its lowest level in nearly eight weeks as investors turned cautious after a sell-off in U.S. markets halted an impressive start to the year.

The S&P/TSX Composite Index closed down 0.9 per cent to 15,955.51 points after closing lower by 0.9 per cent on Monday. That is the biggest two-day drop since May.

The benchmark index is now down 1.6 per cent for the year — which was the worst performance in developed markets.

Energy shares weighed on the benchmark index as crude oil prices tumbled for a second day after U.S. stockpiles were seen as expanding for the first time in 11 weeks.

The price of crude oil fell $1.06 US to $64.50 a barrel in New York.

Shares of heavyweights Cenovus Energy were down four per cent, while Encana slumped 2.2 per cent. 

On the other end, shares of Thomson Reuters jumped as much as 10 per cent on news it was in advanced talks with private equity firm Blackstone for a potential partnership in its financial-data and risk business.

It closed down over seven per cent.

The Canadian dollar, meanwhile, traded at an average at 81.12 US cents, up from Monday's average price of 81.07.

U.S. stocks tumble

U.S. markets fell to their biggest loss since August ahead of the Federal Reserve's monetary policy meeting on Wednesday.

"Investors are getting a bit worried about inflation, which has led some people to believe that the Fed might be more aggressive when it comes to raising rates," Robert Pavlik, strategist at SlateStone Wealth told Reuters.

The Dow Jones Industrial Average fell 1.4 per cent, or 362 points, while the Nasdaq Composite closed down 0.9 per cent. The S&P 500 index finished lower by 1.1 per cent.

Gennadiy Goldberg, strategist at TD Securities told Reuters that investors initially were spooked by the two-day decline on Wall Street, which prompted a flight to the safety of U.S. government bonds.

The yield on the 10-year Treasury note rose to 2.72 per cent — its highest level in almost four years.

Shares of health-care stocks took a big hit and were among the biggest losers on benchmark indexes after a new venture was announced by Amazon, JPMorgan Chase and Warren Buffett's Berkshire Hathaway.

The world's biggest e-commerce retailer is teaming up with the two other major companies to create a company that helps its U.S. employees find quality care at "a reasonable cost."

The news sent shares of prescription drug makers, drug distributors and health insurers into big losses.

Express Scripts lost over three per cent and UnitedHealth Group sank over 4.3 per cent.  

Derek Holt, head of capital markets economics at Scotiabank, said markets are also seeing a rebalancing that happens at the end of the month, when investors take holdings away from stocks to bonds.

"By week's end, we should have a better sense of whether recent market swings are somewhat transitory in nature or longer lived," he said.

Rest of the world

European shares closed lower despite economic data showing the euro zone economy grew at its fastest pace in a decade last year.

Analysts said the strong growth could help convince the European Central Bank to wind back its monetary stimulus program earlier than expected. 

Britain's FTSE 100 and Germany's DAX lost about one per cent each.

In Asia, Japan's benchmark Nikkei 225 index closed down 1.4 per cent, marking its first five-day losing streak since November, while Hong Kong's Hang Seng index fell 1.1 per cent. The Shanghai Composite lost 0.8 per cent.