*Energy sector rallies after OPEC decision to cut output
*CIBC World Markets cuts TSX 2008 yearend target
*Transat slips after it reports third-quarter loss
TORONTO, Sept 10 (Reuters) - The Toronto Stock Exchange’s main index rose on Wednesday, led by strength in oil shares after a surprise decision by OPEC to cut production and by bargain-hunting after a near 4-percent selloff on Tuesday.
The heavyweight energy sector was up 2.2 percent following the decision by the Organization of the Petroleum Exporting Countries to cut production by half a million barrels a day. Oil prices slipped, however, on slowing demand and as fears over Hurricane Ike receded.
Canadian Natural Resources (CNQ.TO) jumped 3 percent to C$76.62.
The resource-laden materials group was up 1.3 percent as investors snapped up stocks at bargain prices, despite softness in the price of bullion and as base metals prices fell. Barrick Gold (ABX.TO) climbed 4.7 percent to C$29.33.
“When you get an oversold situation like yesterday it’s bound to rally shortly thereafter,” said Lex Kerkovius, senior research analyst at McLean & Partners Wealth Management Ltd., in Calgary, Alberta.
“We’re getting a technical bounce but we’re also getting some support from OPEC. There is a bit of sentiment shift here.”
Late on on Wednesday morning, the S&P/TSX composite index .GSPTSE was up 178.53 points, or 1.47 percent, at 12,325.29, with all 10 of its main groups higher. Earlier, the benchmark index rhad risen 2.3 percent.
The rally comes after the benchmark index fell 487.88 points, or 3.9 percent, on Tuesday in a commodities selloff triggered by falling oil prices.
As of Tuesday’s close, the benchmark index had posted triple-digit losses in five of six sessions, shedding more than 11 percent in a week. This pushed it toward a bear market territory, which is defined as a 20 percent decline from its peak.
“There was a bit of panic going on,” said Kerkovius. “People were throwing in the towel.”
Jeff Rubin, CIBC World Markets chief economist and chief strategist, cut his yearend target for the composite index to 13,000 from 14,300, and lowered his 2009 target to 14,000 from 15,250.
Dimming global economic prospects and selling pressure on markets are significant enough to warrant a more “cautious stance,” Rubin said in his latest Canadian portfolio strategy outlook report, released on Wednesday.
“Our targets imply a slightly negative annual total return from the TSX this year but a more typical return next year,” he said.
Research In Motion Ltd RIM.TORIMM.O rose 4.2 percent to C$110.47. RIM is launching a flip version of its popular BlackBerry Pearl smartphone, a move that reasserts its push into the retail consumer market.
Holiday travel firm Transat AT Inc TRZb.TO fell 2.6 percent to C$17.46 after it reported a third-quarter loss, hurt by rising fuel costs. ($1=$1.07 Canadian) (Reporting by Jennifer Kwan; Editing by Peter Galloway)