Toronto stock market closes almost 600 points lower after 1,200-point drop

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THE CANADIAN PRESS

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TORONTO - A rally at the end of the day somewhat reduced earlier gut-wrenching losses on the Toronto stock market yesterday, with the S&P/TSX composite index closing down 572.92 points after earlier plunging almost 1,200 points.

The Toronto stock market's main index closed down 5.3 per cent at 10,230.43, a victim of a global panic over faltering economies and the sharp drop of crude oil prices.

The loonie was also hammered, closing down 1.48 cents to 90.98 cents US, the lowest close since May 2007. Earlier, the dollar fell as low as 90.17 cents US.

Fred Ketchen, equity trading manager at Scotia Capital, said the TSX has lost more than one-third of its value from its high back in June and the volatility seen Monday is from a combination of "panicked" investors selling stocks and bargain hunters snatching up deals.

"If you've got any spare cash and you're looking for half-decent grade securities ... there's a sale going on," said Ketchen.

"If you like a sale, well, they don't have a sign outside the stock exchange, but we know by the index that that's what's happening."

Crude oil, a major influence on Canada's stock markets, slid $6.07 to US$87.81 a barrel, its lowest point in eight months.

Kate Warne, a Canadian market strategist at Edward Jones, said commodity prices should take a large portion of the blame for the record-setting plunges seen on the TSX lately.

"With the Toronto market being so sensitive to commodity prices as well as sensitive to the slowdown in the U.S., Toronto's getting hit basically twice as hard as everyone else," said Warne.

Oil prices have tumbled about 40 per cent or US$60 since peaking at about US$147 a barrel in July, on fears the spreading financial crisis will aggravate a worldwide economic slowdown and cut demand for energy.

The TSX Venture Exchange plunged 166.13 points or 13 per cent to 1,134.1.

New York equity markets were also lower amid deepening bank-sector woes and investor worries that the Bush administration's US$700-billion rescue plan for financial institutions won't unfreeze credit markets.

Global banks, hobbled by wrong-way bets on mortgage securities, remain starved for cash as credit has dried up.

The Dow Jones industrial average fell below 10,000 for the first time in four years, losing 369.88 points to 9,955.5, while the Nasdaq composite index lost 84.43 to 1,862.96. The S&P 500 was down 42.34 at 1,056.89.

On Bay Street, however, there were expressions of confidence as the Bank of Nova Scotia (TSX:BNS) agreed to pay $2.3 billion to Sun Life Financial Inc. (TSX:SLF) for its 37 per cent interest in CI Financial Income Fund (TSX:CIX.UN). CI units were down 44 cents to $16.20, while Scotiabank was down $2.16 at $45.

The TSX financial sector was down 3.7 per cent.

In economic news, the value of building permits issued by Canadian municipalities tumbled 13.5 per cent in August compared with July. On a year-to-date basis, permits are down 0.7 per cent from 2007.

And in fresh steps to ease the credit crisis, the U.S. Federal Reserve announced it will begin paying interest on commercial banks' reserves and will expand its loan program to squeezed banks.

The Fed also announced yesterday it will provide as much as $900 billion in loans to squeezed banks in an urgent effort to break through a credit clog that threatens the economy.

On the TSX, the energy sector plummeted 9.4 per cent. Suncor Energy (TSX:SU) was down $4.94 or 14 per cent to $31.50 while Canadian Natural Resources (TSX:CNQ) fell $5.56 to $58.36.