Toronto stocks rose strongly yesterday as energy issues rebounded from two days of weakness, while investors tried to set aside worries about the economy and inflation after Tuesday's interest-rate cut in the United States.
The Toronto Stock Exchange's S&P/TSX composite index rose 101.64 points, or 0.73 per cent, to close at 13,940.07. For the week, the market rose 0.7 per cent.
Energy shares climbed yesterday after being hammered in the past few days over an Alberta government panel's recommendation to increase oil and gas royalties. The subgroup's gain came to 1.3 per cent, even though oil prices came off the record levels hit on Thursday.
"I think people are saying that this Alberta thing isn't law yet, and these stocks have been beaten up pretty badly," said John Kinsey, portfolio manager at Caldwell Securities in Toronto.
Canadian Natural Resources rose $1.64, or 2.2 per cent, to $76.84.
Most main groups gain
All told, eight of the TSX's 10 main subgroups rose, with strength also evident in the consumer discretionary and consumer staples sectors, which each climbed 1.3 per cent.
The U.S. Federal Reserve's rate cut of half a percentage point earlier in the week boosted stocks, but analysts said it also suggested the Fed was much more worried about the U.S. subprime mortgage market and tight liquidity than investors previously thought.
The move also sparked worries that inflation could rear its ugly head, which prompted selling over the past few sessions.
But investors may have overreacted in their caution, some analysts said.
"Our view is that the fundamentals are still reasonably positive, and the Fed is going to supply liquidity to the system," said Irwin Michael, portfolio manager at ABC Funds.
He said sluggish end of week trading volumes and portfolio adjustment ahead of the end of the fiscal quarter were also playing a role yesterday in the market's overall direction.
Blue chips rise
On Wall Street, the Dow Jones industrial average rose 53.49 points, or 0.39 per cent, to 13,820.19. On the week, the gain came to 377.67 points, or 2.8 per cent.
The Standard & Poor's 500 index gained 7 points even, or 0.46 per cent, to 1,525.75.
The Nasdaq composite climbed 16.93 points, or 0.64 per cent, to 2,671.22.
Profit-taking hits oil
Also in New York, oil prices fell as investors sold to lock in profits, but analysts doubt the commodity's record-breaking run is over.
Gasoline prices have so far held steady or even fallen despite a rally that boosted oil to new records for eight straight trading sessions on the New York Mercantile Exchange.
"That's over now," said Tom Kloza, publisher and chief oil analyst at the Oil Price Information Service. "From now on, every $1 (U.S.) a barrel advance in crude has to be accompanied by a 2 1/2 cent increase in gas prices.''
Interest rates and their role in pulling the U.S. dollar lower are drawing fresh investment dollars into energy markets, analysts say. Because oil and other commodities are priced in U.S. dollars, they still appear cheaper to overseas investors, whose currencies have strengthened against the greenback.
Light, sweet crude for November delivery fell 16 cents a barrel to settle at $81.62 after rising as high as $82.40 earlier.
Despite yesterday's decline, many analysts expect oil to continue rising in the near term.
`Necessary panic' pending
That may not be the case for stocks, however, according to Ron Meisels, technical analyst and president of Phases & Cycles Inc.
He still advises investors to stick to the sidelines for the time being, because the market hasn't yet seen the "necessary panic" that usually comes at the end of a major correction.
He expects the markets to retest recent lows, but said it's not so much about how low an index goes as it's about how long it takes to get there.
He predicted "a drawn-out affair" for markets.
Via| TheStar
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