North American stock markets whipped lower as Apple signals weakness in China

North American markets were whipped lower Thursday after Apple's warning about weaker holiday sales particularly in China signalled that trade tariffs could take more a bigger bite out of corporate earnings.

Market movements including large swings from one day to the next signal that sentiment remains fragile, says Mike Archibald, associate portfolio manager, AGF Investments Inc.

"I think this is probably the first major downgrade that we've seen for fourth-quarter earnings, although I suspect this isn't the last one," he said in an interview.

In New York, the Dow Jones industrial average was down 660.02 or 2.8 per cent in the second trading day of the year to 22,686.22. The S&P 500 index was off 62.14 points at 2,447.89, while the Nasdaq composite lost 202.43 points at 6,463.50 with Apple falling by 10 per cent.

Canada's main stock index posted a triple-digit decline as the S&P/TSX composite index closed down 134.41 points to 14,212.75 after hitting a low of 14,155.27.

"It's a bit of a nasty day out there again and until we kind of get a footing around the proper number to use for earnings estimates next year I think we're likely to still see some of this volatility in the market."

Archibald said the weaker outlook for China and weak U.S. manufacturing numbers released Thursday will put pressure on the presidents of the world's two largest economies to make a deal faster to stop some of the economic uncertainty.

The weakening will also likely slow the Federal Reserve's interest rate hikes, which will weaken the U.S. dollar.

"I think that's part of the reason why you've seen Canada hold up relatively well in the first couple of days of this year because the commodities complex, particularly gold and oil, have acted fairly well in the context of a bit of a weaker U.S. dollar," he said.

The Canadian dollar traded at an average of 74.02 cents US compared with an average of 73.50 cents US on Wednesday.

Despite losing ground, the TSX held up better than U.S. markets as gold and oil prices increased.

The February crude contract was up 55 cents at US$47.09 per barrel and the February natural gas contract was down 1.3 cents at US$2.94 per mmBTU.

The February gold contract was up US$10.70 at US$1,294.80 an ounce and the March copper contract was down 5.5 cents at US$2.57 a pound.

The Canadian information technology sector fell 3.9 per cent, while economically sensitive areas such as industrials, consumer discretionary and materials fell. Miner Teck Resources Ltd. B shares lost more than six per cent on copper dipping below the $2.60 threshold on concerns about China. Meanwhile, utilities and telecommunications were in the black as investors continued to move to defensive sectors.

Energy lost some ground even though the price of West Texas Intermediate hit its highest level in two weeks. That gave a little bounce to mid and small cap energy names like Precision Drilling Corp. and Yangarra Resources Ltd., which gained nearly five per cent.

Archibald said the market is oversold, presenting an opportunity for stocks to have a bit of a rally.

"So the bulls are starting to try and back into this market a little bit but with 500-point swings in the Dow Industrial average on a daily basis, it's difficult to put a lot of new money to work with a lot of confidence."

Companies, index and currency in this story: (TSX:TECK.B, TSX:PD, TSX:YGR, TSX:GSPTSE, TSX:CADUSD=X)