Canadian blue-chip stocks are taking a pounding today on news that Standard & Poor’s will drop five Canadian firms from the S&P 500 index. The S&P/TSX index is down 74 points to 6,961.

Volume is improved today, but still on the light side at 89.6 million shares, with selling action overwhelming the buying by about 33:10. Losers hold a three to two edge on winners.

Tech stocks are down almost 5% on the day, followed by a 4% slide in diversifieds, a 3% drop in the health care space and materials, a 2% slide in golds and 1% in financials. Energy is the only sector gaining ground on news of higher prices due to lower U.S. inventories.

The S&P 500 eviction news is dominating the trade, with all five firms kicked out of the index moving lots of market cap. S&P wants to restrict the benchmark index to U.S. stocks only.

Nortel is taking the hardest hit, dropping 10% on 19.1 million shares. That sort of volume would likely have crashed the old TSE, but today it passed without a hitch. Inco has dropped 8% on the news, Placer Dome is down 5.5%, followed by a 5.3% slide in Alcan, and a 4.6% loss by Barrick.

Aside from these stocks, there’s weakness in names such as Celestica, Falconbridge, Angiotech, Biovail and Duke Energy.

Against the tide of selling, there are gains in BCE, Cott, Cinram and Tembec.

The energy group is up behind the leadership of EnCana. There are also notable gains in Baytex Energy, Precision Drilling, Talisman and Suncor.

There’s another rare occurrence on the TSE today, with an M&A deal that the market likes from both sides. The buyer and seller are both up on the news that CanWest has entered into an agreement to sell all of its community newspapers and related assets in Atlantic Canada and Saskatchewan to GTC Transcontinental Group for $255 million in cash. Additional asset sales remain a high priority of CanWest, including those community newspapers located in Ontario that weren’t part of today’s deal. CanWest is up almost 5% on the day, and GTC, owner of Investment Executive, is up almost 3%.

In other news, Co-Steel’s positive earnings announcement from yesterday was very short-lived. Today it said that the profit it expected yesterday will now be a loss because ASW Holdings plc, which it owns 30% of, is heading into receivership. As a result, Co-Steel will write off its remaining investment in ASW and record a non-cash charge of $9.1 million in the second quarter of 2002.

Microcell Telecommunications also says that it does not expect to meet its guidance provided in February. It has also decided to withdraw its appeal of the Nasdaq decision to delist the company’s shares.

Finally, Royal Bank intends to redeem $400 million of its outstanding subordinated debentures. The redemption will be financed out of the general corporate funds.

In New York, it has been another choppy trade. Stocks opened higher, led by the techs. Also, the firms joining the S&P 500 at the expense of foreign firms have enjoyed strong buying. However, jitters over corporate earnings and yet another false terrorist scare has sent stocks lower at midday.

The Dow Jones industrial average is down 112 points to 8,984. The S&P 500 has dropped 16 points to 937. And, Nasdaq composite index is down 11 points to 1,370.

The S&P/TSX Venture index has not escaped the selling either. It is down 11 points at midday to 1,146 on light volume of 10.7 million shares. American Bonanza Gold is the top trader, down 1¢ to 20¢ on 487,500 shares.