Market Wrap Up – August 25, 2008

The S&P/TSX composite traded lower today, down 158.33 points at 13,288.96, pulled down by mining and financial stocks while Maple Leaf Foods continued to tumble amid a recall of meat products linked to a food poisoning outbreak. Maple Leaf Foods Inc. said on Sunday it expects a direct cost of about $20 million from a recall of contaminated meat linked to an outbreak of food poisoning that has killed at least four people in Canada.

 

In other news, Precision Drilling Trust has finally reached a deal to buy Grey Wolf, Inc. in exchange for the equivalent of $2.1 billion in cash and equity. Lastly, Q9 Networks Inc. announced Monday that it has reached a deal that would see it acquired by Abry Partners. Q9 released a statement saying the Boston-based communications private equity firm would purchase the company for $361 million.

 

U.S. News

U.S. stocks dropped sharply on Monday, retreating from the last session’s strong gains, as oil remained above $114 a barrel and as concerns about the financial sector continued to weigh on investor sentiment. The Dow Jones Industrial Average sank 242 points to 11,386, and the S&P 500 slid 25 points to 1267. The Nasdaq skidded 49 points to 2365. All three lost roughly 2 percent. Mortgage firm Freddie Mac saw shares rise 21 percent on Monday after the firm successfully sold $2 billion worth of three-month and six-month bonds. During the previous week, a less successful bond sale had investors worrying about the company’s ability to raise capital. Freddie’s sister company, Fannie Mae, traded up 14 percent in sympathy. The two were among the only financial-services stocks marking gains and led among the S&P 500’s gainers.

Along with AIG, financial firms JPMorgan and Bank of America were dragging the Dow lower. JPMorgan announced that it had lost $600 million during the current quarter on investments in Fannie and Freddie, sending shares down 2.8 percent. Bank of America dropped 2.6 percent. None of the index’s 30 components were in the green.

 

Economic News

 

As for economic data, the National Association of Realtors’ US existing-home sales report came in at an annualized rate of 5 million units in July, vs. 4.85 million in June and ahead of analyst expectations. Inventories, however, rose 3.9 percent to 4.67 million units, a record level, and home sales fell 13.2 percent year over year, and the median home price fell 7.1 percent from a year ago.

 

The Canadian dollar, meanwhile, was trading at 95.17 cents US, down 0.004 from Friday’s close. Oil prices seesawed after tumbling $6.59 a barrel Friday to settle at $114.59 on a stronger dollar and bets that global demand is slowing. U.S. light crude oil for October delivery rose 52 cents to settle at $115.11 US per barrel onthe New York Mercantile Exchange. Retail gas prices continued to drop overnight, extending the downward trend, according to a survey of gas station credit-card activity. Gas prices are down 10 percent from all-time highs hit in mid-July.

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