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TSX tumbles 170 points on lower oil, gold prices; New York indexes also retreat

TORONTO – Oil prices plunged below the US$40-a-barrel level on Wednesday, pulling the Toronto stock market to a steep, triple-digit loss after two days of stellar advances.

The S&P/TSX composite index ended the day down 172.24 points at 13,463.82, after having soared almost 268 points over the first two trading days of the week.

The heavily weighted energy sector was the biggest loser, down 3.47 per cent as the January contract for benchmark crude oil fell $1.91 to end trading at US$39.94 a barrel.

Gareth Watson, director of the Investment Management Group at Richardson GMP, said the importance of commodity-related stocks to the Canadian market has come down over the last year as prices have slid.

But outside investors are still wary of Canadian-listed companies because of the perception that the country’s economy performance is tied to commodities and are sensitive to the relative gains in the recovering American economy.

“Canada is not a go-to market at this stage, and it probably won’t be for a while,” he said.

The last time crude oil futures settled below $40 was Aug. 26, near the end of a period of volatility marked by chaos in Chinese markets and a six-day slide in New York exchanges that was the longest in more than three years.

Earlier today, the U.S. Energy Information Administration said American commercial crude oil inventories rose by 1.2 million barrels in the week ended Nov. 27.

“U.S. crude oil inventories remain near levels not seen for this time of year in at least the last 80 years,” the agency said in a release.

Natural gas also lost value on the day, shedding 6.6 cents to settle at US$2.165 per mmBtu

The run on commodities also bit in New York. The Dow Jones average of 30 stocks closed down 158.67 points to 17,729.68, while the broader S&P 500 fell 23.12 points to 2,079.51. The Nasdaq gave back 33.08 points to 5,123.22, despite a boost from a more than five per cent surge in Yahoo (Nasdaq:YHOO) shares.

Yahoo’s stock closed up $1.95 to US$35.65 amid reports the company is considering selling its core Internet businesses after having struggled for years to re-energize its business model.

The February gold contract dropped $9.70 to US$1,053.80 an ounce.

The Canadian dollar ended the day up 0.08 of a cent to 74.91 cents U.S. after the Bank of Canada announced it was keeping its key overnight lending rate steady at 0.5 per cent.

The loonie has fallen more than 13 per cent against the American greenback over the past year.

Markets generally believe that unless U.S. employment figures for November scheduled for release on Friday prove to be extraordinarily weak, the U.S. Federal Reserve will raise interest rates from record lows near zero for the first time since the financial crisis.