TSX down 206, Dow loses 335 points in stock market sell-off

North American stock markets sold off sharply Thursday following an upsurge a day earlier, as the reality of a bleak view on the U.S. economy from America's central bank sank in .

At the close, the Dow Jones industrial average was off 334.97 points or two per cent to 16,659.25. Toronto fared slightly better, but was still down 205.87 points or 1.4 per cent to 14,460.60, largely on weakness in oil.

The Standard and Poor's 500 fell 40 points, or 2.1 per cent, to 1,928. The Nasdaq composite fell 90 points, or 2.0 per cent, to 4,378.

The stock swoon came a day after the U.S. Federal Reserve minutes showed a gloomier than expected reading on the economy — implying that it may have to keep cheap lending around for longer to stimulate the economy. Cheap money is good news for stocks, and the stock market had one of its better days of the year on Wednesday.

But as the reality of the Fed's bleak outlook sank in on Thursday, it appeared that traders were getting out of stocks en masse and hoarding cash for uncertainty ahead.

'Dead cat bounce'

"We're having a really rough day in the markets and basically giving back everything from yesterday's Fed minutes rally," Colin Ciezynski, market analyst at investment firm CMC Markets told CBC News in an interview "Yesterday's rally was really a … dead cat bounce."

Oil was a particular source of weakness on both sides of the border. Shares in Exxon and Chevron, America's two largest oil companies, lost about three per cent each. Canadian names fared little better, with Suncor and Imperial Oil both losing about 2.5 per cent of their value.

There was no place to hide on the TSX, as all 10 of the stock exchange's subindexes were in negative territory.

"It's a phase we have to go through," Ciezynski said. "It can be very rough for a period of several months."

The coal sector was also a concern on both sides of the border, as China imposed tariffs on coal imports that are meant to protect its domestic industry at the expense of importers.

Figures on the German economy also put a damper on Wednesday's strong market rally, as the country's August exports made their steepest decline in five years. Other German data released this week also showed drops in factory orders and production.

If global growth weakens, that cuts the prospect for sales of both commodities and manufactured goods, cutting back the potential for profit. 

The benchmark TSX is down about seven per cent since hitting a record high last month, after a week that saw wild swings in stock prices. 

“The market will be paying very close attention to global growth and its impact on earnings in the upcoming earnings season," said Macan Nia, director of the portfolio advisory group at Manulife Asset Management.​