The S&P/TSX composite index took a turn deep into negative territory on Tuesday -- ending down 400.88 points to 9,829.55 -- as paniced investors once again raced to the sidelines desite a rebound in oil and news that the Federal Reserve will buy short-term debt from U.S. companies to provide relief from the credit crisis.
The Bank of Canada said on Tuesday it will not participate in coordinated central bank actions aimed at increasing U.S. dollar liquidity. The central bank said it welcomes central bank initiatives to provide U.S. dollar liquidity but felt it was not necessary for it to participate in the auctions at this time.
On the corporate front -- Tim Hortons has signed a deal for 82 full-service restaurants and self-serve kiosks at Tops Friendly Markets grocery stores. The agreement will put new locations of the iconic Canadian coffee and doughnut retailer in Western New York, Rochester, Central New York and northwestern Pennsylvania, the company said Tuesday. Financial details of the agreement were not disclosed.
Down south -- the Fed announced creation of a new lending facility to buy short-term commercial paper from businesses. The central bank also said it expects the new lending program to remove the stoppage in the credit markets
Outside of Canada -- a surprisingly large rate cut from Australia on Tuesday reignited hopes for coordinated measures by central banks other than Sydney. But the Federal Reserve announced a fresh dollar auction with overseas counterparts but no rate cut.
The Bank of England is expected to cut rates on Thursday, while the Bank of Japan opted to keep rates on hold.
The Canadian dollar, meanwhile, edged down slightly, losing 0.35 of a cent to 90.45 cents US.
BAYSTREET
Two of the TSX sub-groups traded higher today -- gold stocks were ahead 1.22 percent followed by a 0.18 percent gain in material issues.
COMEX gold for December delivery rallied $15.80 to settle at $882 US an ounce.
On the downside -- mining stocks were off 6.89 percent; energy issues shed 6.29 percent and tech stocks fell 5.30 percent.
Meanwhile, the TSX Venture Exchange was off 39.64 points to 1,094.46 while NASDAQ Canada stocks were down 39.71 points at 602.03.
ON WALLSTREET
Wall Street's sell-off continued Tuesday, with a 500-point loss bringing the Dow's two-day drop to nearly 900 points, as the Federal Reserve's plan to loosen credit markets failed to counter investor pessimism about the government's ability to rescue the markets.
The Dow Jones Industrial Average lost 508.39 points, or 5.1 percent, to 9447.11. The S&P 500 was off 60.66 points, or 5.7 percent, to 996.23, trading below the 1,000-point mark for the first time in five years. The Nasdaq lost 108.08 points, or 5.8 percent, to 1754.88.
Fed Chairman Ben Bernanke's dour economic outlook in an afternoon speech added to the day's weakness. And a report showed consumer borrowing in August fell for the first time since January 1998.
The minutes from the last Fed policy meeting were released shortly after Bernanke's speech. The minutes showed the bankers were equally worried about growth and inflation at the Sept. 16 meeting, in which they opted to hold interest rates steady. The meeting occurred one day after Lehman Brothers filed the biggest bankruptcy in history.
Also -- the Federal Reserve and Treasury Department said they would buy commercial paper, short-term financing that companies use to fund day-to-day operations, from individual companies.
This would, in essence, put the Fed in a position of funding companies in order to keep the economy running. In the current credit crisis, companies are having a difficult time getting funds to operate.
Bank of America on Monday reported a 68 percent plunge in third-quarter profit, chopped its dividend in half and announced plans to sell off $10 billion worth of stock.
Also -- the battle over the Wachovia takeover took a break, as the prospective buyers Wells Fargo and Citigroup decided late Monday to halt litigation until Wednesday.
In the technology sector, chipmaker Advanced Micro Devices announced a plan to spin off its manufacturing operations.
Longer-dated U.S. Treasury securities were lower. The 10-year was down 17/32 to yield 3.52 percent, and the 30-year was slipping 31/32 to yield 4.02 percent. The American dollar was edging higher vs. the yen, but softening against the euro and pound.
U.S. light crude oil for November delivery settled up $2.25 to $90.06 US a barrel on the New York Mercantile Exchange, after ending the previous session at an eight-month low.
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