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Trading on the NYSE (MIKE SEGAR/Mike Segar/Reuters)
Trading on the NYSE (MIKE SEGAR/Mike Segar/Reuters)

TSX driven lower as oil price drops Add to ...

Investors continued to rein in their optimism on Wednesday, and sent the Toronto stock market lower, driven by weaker oil prices and a renewed sense of caution about the economic recovery.

The S&P/TSX composite index moved back 115.21 points to close at 10,455.33, making it the second consecutive session of triple-digit losses for the TSX. The main index fell 187 points on Tuesday.

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The pullback suggested investors aren't convinced that the economy won't experience more turbulence in the short term.

The Canadian dollar closed at 91.68 cents (U.S.), down 0.65 of a cent.

On the TSX, the energy sector backed off 2.8 per cent as a weekly report from the U.S. Energy Department showed that inventories rose more than expected last week. Light, sweet crude for September delivery fell $3.88 to $63.35 a barrel on the New York Mercantile Exchange.

The lower price of commodities has been having a negative impact on the results of several Canadian companies. Metals stocks were the biggest decliner, down 3.6 per cent.

Talisman Energy Inc. said profits plunged 85 per cent, while Sherritt International Corp. , a miner, coal producer and power producer, said its profits dropped to $24.4-million, from $80.3-million a year earlier, on weaker commodity prices.

The TSX Venture Exchange ended 3.63 points higher to 1,131.74.

On Wall Street, the Dow Jones industrials was down 26 points to 9,070.72.

The Nasdaq composite dipped 7.75 points to 1,967.76 while the S&P 500 index gave back 4.47 points to 975.15.

Bill Harris of Avenue Investment Management said the downturn over the past two days is largely tied to U.S. housing numbers released Tuesday.

The S&P/Case-Shiller Home Price index indicated that home prices posted their first monthly increase since the summer of 2006, giving the markets some hope that a recovery is developing.

Mr. Harris said that is "unbelievably important" to Canada because it's the first sign that the U.S. Federal Reserve might consider increasing interest rates, which would send the U.S. dollar higher.

"There's a risk they may actually tackle inflation," he said.

"For Canada, it takes the excitement out, because you might be attacking the inflationary pressure ahead of what everybody expected."

He said that's having an impact on gold stocks in the short term, and contributing to the downturn in resource stocks. The price of gold for August delivery closed down $9.60 to $943.90 an ounce on the Nymex.

Meanwhile, the U.S. Commerce Department said orders to U.S. factories for big-ticket manufactured goods dropped an unexpectedly steep 2.5 per cent in June, the largest drop in five months. Economists were expecting a drop of 0.6 per cent.

 
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