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Market Update – August 27, 2008

The S&P/TSX composite traded higher today, up 231.58 points at 13,530.65, as oil prices continued to rise on worries that Tropical Storm Gustav may disrupt oil and gas operations in the Gulf of Mexico while CIBC reported a huge drop in profit from a year ago.


CIBC reported that net income fell to $71 million for the third quarter, down from $835 million for the same period last year as the bank was hit with more losses connected with the American housing sector. Diluted earnings per share were 11 cents, down from $2.31 a year ago. In other news, Scotiabank says it will pay US$15 million for 33 percent of a new mutual fund company in China that will be formed with the Bank of Beijing.


U.S. stocks on Wednesday stepped higher as investors found reason for economic hope in a July rise in orders for U.S. durable goods, with a spike in the price of crude viewed as temporary in light of storm conditions in the Gulf of Mexico. The Dow Jones Industrial Average was climbing 107 points to 11,520, while the S&P 500 was gaining 12 points to 1283. The Nasdaq rose 30 points to 2392.


General Motors plans to reduce its vehicle output in Spain to account for flagging demand, Reuters reported. GM will shutter its Figuerelas auto plant for two days in September and four days in October, lowering production by 12,000 vehicles. ConocoPhillips plans to exit the gas station business, selling off the last of its 600 stations to PetroSun West for $800 million, The Wall Street Journal reported. The deal is part of a growing trend among oil companies, which are exiting the business to concentrate on energy exploration. The firm’s Conoco, 76 and Phillips 66 stations will retain their branding.


TiVo, the company that whose little black box allows users to watch what they want when they want, is now letting its customers sample other people’s tastes, namely those of the staff at Entertainment Weekly. The company is entering a deal with the magazine, which is owned by Time Warner, which will allow users to configure their TiVo devices to automatically record programs recommended by EW, The Wall Street Journal reported.


On the data front, Statscan reported Wednesday that the average weekly earnings of employees were $789.23 in June, up a moderate 0.1 percent from May and 2.5 percent from a year ago. Down south, orders for big-ticket manufactured goods jumped for a second straight month, the government reported Wednesday. Orders rose 1.3 percent in July, easily outpacing the 0.1 percent gain economists were expecting, on average. The rise was in line with the upwardly revised 1.3 percent increase reported in June. Separately, the Federal Housing Administration said it would increase the price of its insurance of mortgages to 1.75 percent of the loan amount from 1.5 percent. The new rate takes effect on Oct. 1. And early Wednesday, the Mortgage Bankers Association reported a week-over-week rise of 0.5 percent in mortgage applications for the week ending Aug. 22.


The Canadian dollar, meanwhile, was trading up 0.19 cent at 95.57 cents US. Crude oil settled up $1.88 at $118.15 US a barrel after the Energy Department said that stockpiles of unused crude fell by 100,000 barrels and gasoline stockpiles fell by 1.2 million barrels last week.


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