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The Toronto stock market bounced back after a deep plunge during a volatile day of trading following Tuesday's interest rate cut announcements by North American central banks.

Lower oil prices, energy stock declines, and disappointing reports from the technology sector contributed to a 208.12-point-decline on the S&P/TSX composite index by mid-afternoon on Wednesday. But it rose again by late afernoon. The index closed at 12,680.11, up by 39.22 over Tuesday's close at 12,640.9

"It's often said you don't get these volatile day-to-day swings in the markets unless you're in a bear market -- that is down 20 per cent from the peaks. A lot of people argue that's where we are right now," BNN analyst Mark Bunting told Â鶹´«Ã½net.

"However, we did see financials -- which have been so beaten up in recent months doing well today -- leading the rally basically. So, Canada's big banks did well."

Earlier in the session, it had lost more than 400 points.

"This wasn't expected, necessarily, on Bay Street, but it was expected in New York," BNN's Michael Kane told Â鶹´«Ã½net on Wednesday.

However, Kane said the TSX is heavily weighted to resource stocks, and prices for both metals and oil are down slightly.

The index soared 508 points on Tuesday following news of interest rate cuts.

The Bank of Canada cut its interest rate by 25 basis points, which cheered investors, but not as much as the 75-basis-point cut by the U.S. Federal Reserve.

In response, the Dow Jones Industrial Average finished down 1.1 per cent on Tuesday after initially plunging 450 points. The Dow was down 255 points, or 2.1 per cent, on Wednesday. The Nasdaq and Standards and Poors indexes were also down.

Kane said earlier on Wednesday that there are warnings coming out that the big rate cut by the Fed might not be enough to help the United States overcome its economic problems.

"Credit Suisse put out a strategy note saying the underpinnings of a bull market have not been put into place," he said. "That's just too pessimistic for a lot of investors, and they're pulling out."

In Canada, there was some bad economic news before the markets opened when Statistics Canada reported that its composite leading index slipped by 0.1 per cent in December.

The index had been flat for two months before that, which is the longest period of weakness since early 2001.

However, "there are several reasons to believe that the current slump in the index is not as unsettling as in 2001," the national agency said.

"Much of the weakness was concentrated in the housing index, where unusually heavy snow storms severely curtailed construction in December. Excluding the drop in housing, the composite index would have been flat in December."

StatsCan said the U.S. leading indicator fell 0.2 per cent for the second straight month.

The two main reasons were weakening consumer confidence and ongoing problems in the housing sector.

This was reflected here by "sharp drop in new orders for goods manufactured in Canada," StatsCan said.

The Canadian dollar closed at 97.69 cents US on Wednesday, up 0.42 of a cent.