Markets pause on profit-taking, slight advance in oil price

U.S. fuel inventory above expectations Fears persist over chance of Fed hike

North American stock markets closed lower yesterday amid profit- taking and as crude oil prices climbed higher even after a positive U.S. energy report showed inventories shrank less than expected after Hurricane Katrina.

Toronto’s S& P/ TSX composite index lost traction, falling 32.82 points to close at 10,777.23 on weakness in information technology, energy and financials. On the TSX, advances beat declines 840 to 586 with 232 unchanged. Volume was 274 million shares worth $ 5.31 billion. The TSX Venture Exchange had the only positive finish of the day, ending 19.82 points higher at 1,972.27. The Canadian dollar closed trading at 84.61 cents ( U. S.), up 0.46 of a cent.

“It’s just one of those days where you kind of get a pause because the Canadian market has been pretty good,” said John Kinsey, portfolio manager at Caldwell Securities Ltd.

“ Royal Bank had a nice run and it’s not surprising to see some profit-taking there, and the same holds true for Nortel,” he said. The information technology sector dropped 1.2 per cent, while the utilities groups fell 0.86 per cent.

Nortel Networks Corp., one of the biggest drags on the main index, fell 13 cents ( Canadian) to $ 3.73 due mainly to profit- taking after it raced higher Wednesday on news of a Korean telecom deal. The Royal Bank of Canada headlined a 0.42 per cent drop by the influential financial index, falling $ 1.35 to $ 80.15, after charging higher for two weeks after a solid earnings report. But shares of CI Financial jumped $2.60 to $24.10, and helped cushion the market’s fall, after it revealed plans to convert to an income trust.

In New York, the Dow industrial average fell by 37.57 points to 10,595.93. The Nasdaq composite index was down 6.0 points at 2,166.03 and the Standard & Poor’s 500 index slipped by 4.69 points to 1,231.67. Crude oil prices rebounded from its session lows even after U. S. petroleum data showed inventories shrank in the last week by a little less than traders expected from Katrina’s direct hit on facilities in the Gulf of Mexico.

Abarrel of light crude settled at $ 64.49 ( U. S.), up 12 cents, on the New York Mercantile Exchange after sinking to an intraday low of $ 63.10 following the report’s release.

Despite hurricane Katrina’s devastation and death toll, harm to the U. S. economy appears less than originally expected and that dimmed investor hopes the Fed would halt interest-rate hikes.

“ I think the Fed’s in a box here, and they really don’t have a choice but to raise rates,” said Michael Chren, portfolio manager for Allegiant Funds.

“Rebuilding from the hurricane will be an economic positive next year, you have concerns about inflation, and you have the housing bubble. I don’t think they can stop.” On the New York Stock Exchange, shares in Ford Motor Co. shaved off 21 cents to $ 9.92 after a source said the auto maker is close to selling its Hertz Corp. rental-car division and that its Canadian division was selected as a strike target by the Canadian Auto Workers union in labour negotiations this fall.