September 10, 2008 / 1:26 PM / 10 years ago

Toronto stocks to open higher on bargain hunting

*Oil stabilizes after OPEC says to cut output

*CIBC World Markets cuts TSX year-end targets

*Transat AT reports third-quarter loss on high fuel

TORONTO, Sept 10 (Reuters) - The Toronto Stock Exchange’s main index was poised for a higher open on Wednesday following steep losses in the previous session, as oil stabilized but metals slumped, and as the market edges closer to bear territory.

Investors could buy stocks in the heavyweight energy sector, as the price of crude stabilized after a surprise decision by the Organization of the Petroleum Exporting Countries to cut production.

Investors could also flock to the resource-laden materials group, despite softness in the price of bullion and as base metals fell, as they snap up stocks at bargain basement prices.

Bargain hunters will likely keep the benchmark index up as investors face the reality that a bear market is near, said Joe Ismail, a technical analyst at Maison Placements Canada.

“We’re coming up to that very critical juncture that a lot of investors are looking at,” said Ismail.

“Are we going to breach that area or not? We’ll try to sustain the level above that critical breakdown in the market.”

The S&P/TSX composite index .GSPTSE begins the day at 12,146.76 points, down 487.88 points, or 3.9 percent, after a commodities sell-off was triggered by oil’s tumble.

The benchmark index has posted triple-digit losses in five of the past six sessions and shed more than 11 percent in the past week, pushing it to within striking distance of a bear market, which is defined as a 20 percent decline from its peak.

Jeff Rubin, CIBC World Markets chief economist and chief strategist, cut his year-end target for the composite index to 13,000 from 14,300, and lowered his 2009 target to 14,000 from 15,250.

Dimming global growth prospects and selling pressure on the 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 in the report.

Financials, which have been holding up better than resource stocks, may see weakness on more disappointing news in the U.S. financial sector as Lehman Brothers LEH.N posted a quarterly loss and slashed its annual dividend, reflecting pain from the fallout from the mortgage crisis.

In New York, stock futures pointed flat as Lehman’s results tempered other positive news.

Transat AT Inc TRZb.TO said on Wednesday it fell to a third-quarter loss as the holiday travel firm was hurt by rising fuel costs.

Harry Winston Diamond Corp HW.TO said after the market close on Tuesday its second-quarter profit more than doubled, helped by a foreign exchange gain, as well as higher revenue and wider margins. ($1=$1.07 Canadian) (Reporting by Jennifer Kwan; Editing by Scott Anderson)

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