TORONTO - The Toronto stock market came back from last week's steep loss to surge more than 300 points Tuesday on growing conviction that the spring rally still has momentum.
The main index was helped upward by oil prices topping US$60 a barrel for the first time since November.
New York equity markets were subdued after big gains Monday. A disappointment in housing construction numbers cancelled out a positive earnings report from Home Depot.
Toronto's S&P/TSX composite index gained 338.10 points to 10,100.95. That erased a good chunk of last week's 4.6 per cent decline, which had come as traders took profits from a rally that boosted the composite index by more than 30 per cent.
"We're into the third month of a very powerful rally -- this could go on for months," observed Paul Thornton, investment adviser at Global Maxfin Capital.
"This is going to be driven higher by the enormous amounts of cash that have been on the sidelines -- people are afraid of missing this rally and the institutions have been big buyers."
The TSX energy sector advanced 5.5 per cent as the June crude oil contract gained 58 cents to US$56.61 a barrel on the New York Mercantile Exchange, after surging up US$2.69 on Monday. With the June contract expiring Tuesday, most traders focused on the July contract, which rose 51 cents to $60.10.
The TSX Venture Exchange rose 13.4 points to 1,076.49 while the strong performance on equity and commodity markets energized the Canadian dollar, which ran up 1.67 cents to 86.48 cents US.
"As a result of the reduced risk aversion that's present in the markets, the Canadian dollar has been one of the primary beneficiaries, and that's been the main catalyst for this move," said George Davis, chief technical analyst at RBC Capital Markets.
New York's Dow Jones industrial average finished 29.23 points lower to 8,474.85 after charging ahead 235 points Monday, while the Toronto market was closed for Victoria Day.
The Nasdaq composite index was ahead 2.18 points at 1,734.54 while the S&P 500 index slipped 1.58 to 908.13.
U.S. markets had charged ahead Monday on word of strengthening confidence among homebuilders, but on Tuesday the Commerce Department said residential construction plunged 12.8 per cent in April to a record low, as a steep drop in apartment activity offset a rebound in single-family construction. Permits for new projects also hit a new low.
Economists had expected modest increases, and say the housing market has to stop its slide before America can recover from the recession.
"With the U.S. labour market continuing to weaken at a fairly dramatic pace and the inventory of unsold homes continuing to weigh heavily on new residential construction activity, a sustained recovery in this segment of the U.S. housing market is unlikely to come for some time," commented TD Securities strategist Millan Mulraine.
Meanwhile, Canada Mortgage and Housing Corp. predicted housing starts will decline to 141,900 this year but increase to 150,300 in 2010 as the economy recovers, bringing housing starts more in line with demographics.
On the TSX, the base metals sector ran ahead 7.25 per cent with Teck Cominco Ltd. (TSX:TCK.B) ahead $1.32 to $15.60 and Lundin Mining Corp. (TSX:LUN) advanced 36 cents to $2.70.
The day's 5.5 per cent gain in the oil sector came as EnCana Corp. (TSX:ECA) rose $2.38 to $61.61 and Suncor Inc. (TSX:SU) gained $1.41 to $35.08.
The financial sector rose 3.7 per cent. Royal Bank (TSX:RY) climbed $1.52 to $43.46 and Scotiabank (TSX:BNS) advanced $1.26 to $36.26.
The Toronto gold group was ahead almost one per cent as the June bullion contract in New York rose $5 to US$926.70 an ounce. Goldcorp Inc. (TSX:G) improved 64 cents to $39.65.
"We're seeing a runup now that is both a technical response from the bottom and also the expectation of recovery towards the end of the year or early next year in the economy overall, especially out of China," said Global Maxfin's Thornton.
In New York, Home Depot Inc. fell $1.39 to US$24.63 even as the No. 1 home improvement chain posted stronger-than-expected results. Its first-quarter earnings rose 44 per cent as the company booked fewer charges, and management reiterated its profit forecast for the year. A solid report from rival Lowe's had propped up American markets Monday.
