Another spike in oil prices Wednesday combined with questions about home finance giant Fannie Mae’s accounting sent investors on Wall Street scrambling, while traders on Bay Street were spooked by lower gold prices and a downgrade of Cisco Systems.

At close Toronto’s S&P/TSX composite was down 56.84 points or 0.66% to 8586.09, while the junior S&P/TSX Venture exchange was up 8.45 or 0.55% to 1538.57.

In New York, prices were down sharply early in the day and stayed down: the Dow Jones industrial was off 135.74 points or 1.33% to 10,109.18; the tech-heavy Nasdaq composite index tumbled 35.47 points or 1.85% to 1,885.71 and the S&P 500 slid 15.74 points or 1.39% to 1,113.56.

The Canadian dollar, meanwhile, jumped 0.15 a cent to end the day at US77.89¢. The loonie briefly crossed the U.S. 78¢ level for the first time since mid-January as traders bet that Canadian interest rates would continue to rise and remain higher than U.S. rates. Most economists are convinced the Bank of Canada will increase its key interest rate again when it holds its next policy setting meeting Oct. 19. Many also say another rate hike is likely in December.

In Toronto, tech stocks were lower following a downgrade of Cisco Systems by investment house Deutsche Bank. Cisco, the largest maker of gear for directing traffic over the Internet, fell 3.5% to US$18.96 after Deutsche Bank cut its rating to “hold” from “buy.” The downgrade helped pull the TSX technology sub group down; it was off 0.73%.

Gold shares were off as well, down 1.03% as gold futures fell US$1.10 to US$407.20 an ounce, putting pressure on gold stocks.

Energy shares fell 1.77% in Toronto as oil prices climbed to within a dollar of a new record on Wednesday after the U.S. government reported a big decline in oil stockpiles because of disruptions from Hurricane Ivan. U.S. oil futures settled up $1.59 at US$48.35 a barrel after hitting $48.65 midday, just 75¢ shy of the US$49.40 record struck on Aug. 20. The gains came after the U.S. Energy Information Administration said crude supplies fell 9.1 million barrels last week due to the effects of the hurricane.

Financial stocks were also off, by 0.46%.

In New York, shares of Fannie Mae, the No. 1 U.S. mortgage finance company, fell $4.96, or 6.5% percent, to US$70.69 after its board said a U.S. government review charged it with using “cookie jar” accounting to smooth earnings. The review also called into doubt past financial results.

U.S. markets were also affected by the profit picture at investment banking giant Morgan Stanley. Morgan Stanley shares declined $3.66, or 7% to US$48.72 after it said quarterly profit fell on reduced trading revenue, reflecting the impact of sluggish markets this summer.

Bear Stearns was down 2.4%, or $2.14, to US$87.95 after it said quarterly profit fell 10% but still beat estimates, hurt by lower investment banking revenue and higher expenses.


Wendy’s International Inc. fell $2.16 or 6% to $33.34 a day after the fast-food company cut its annual profit estimate, citing the impact of hurricanes, higher legal costs and steeper beef prices.

Rival McDonald’s Corp. fell 2.7% to US$27.01.