Surging commodity prices pushed stock markets up sharply mid-afternoon Monday as economic data raised hopes for economic recovery while General Motors Corp. filed for bankruptcy protection in the United States.
The S&P/TSX Composite Index leaped 229.62 points to finish at 10,599.69, extending a significant rally that began in early March.
The main index ran up 3.7% last week on higher commodity prices - particularly oil - and bank earnings that beat expectations.
The Toronto energy sector rose as EnCana Corp. picked up $2.85 in price to $62.85 and Suncor Inc. advanced $1.74 to $39.99.
The base metals sector in Toronto rose as the price of copper on the Nymex rose 13 cents to $2.33 U.S. a pound. Teck Resources was ahead $1.50 to $18.65 while HudBay Minerals gained 18 cents to $8.20.
Financials continued to head higher in the wake of last week's earnings reports. Scotiabank rose $1.02 to $39.20 while Bank of Montreal headed up $1.15 to $44.95.
The gold sector backed off as Goldcorp Inc. says it plans a private offering of up to $862 million U.S. of five-year convertible notes that could be exchanged for shares of the mining company under certain circumstances. Its shares were down $2.85 to $40.30.
Health sciences company MDS Inc. said Monday it has begun refocusing business in its troubled Pharma Services division, announcing a deal to sell part of its so-called late stage drug development operations to INC Research for $50 million. Its shares lost early momentum and added three cents to $5.43.
Statistics Canada said that gross domestic product declined 1.4% in the first quarter, the largest quarterly decrease since 1991. GDP contracted at an annualized rate of 5.4% in the first quarter, much better than the 6.5% reading that had been generally expected.
In other economic news in Canada, the Industrial Product Price Index and the Raw Materials Price Index were both down 0.5% in April compared with March.
The Canadian dollar slid 0.11 cents to 91.62 cents U.S.
ON BAYSTREET
Of the 13 TSX subgroups, 10 were in positive territory. Gainers were led by metals and mining stocks, springing ahead 7%, energy stocks, gushing 4.7% and industrials, roaring up 4.3%.
The three subgroups that suffered were gold, off 2.1%, consumer staples, declining 0.3% and materials, sliding 0.1%.
The TSX Venture Exchange was up 16.47 points at 1,140.55 while the Nasdaq Canada Index galloped ahead 30.26 points to 787.73.
ON WALLSTREET
Stocks rallied Monday, sending the Dow Jones industrial average near the breakeven point for the year, as better-than-expected readings on manufacturing activity raised hopes that a global economic recovery is brewing.
The Dow Jones Industrials average picked up 221.11 to 8,721.44
The S&P 500 index jumped 23.73 points to 942.87, while the Nasdaq Composite Index added 54.35 points, to 1,828.68.
Monday's advance came as General Motors officially declared bankruptcy after a months-long restructuring effort fell short.
Two Dow components, GM and Citigroup will be officially removed from the average June 8, Dow Jones and Company announced Monday. Travelers Company will take the place of Citi and Cisco Systems will fill GM's slot.
The rally was broad based, with industrial and technology stocks leading the pack. Boeing rose 6.5% and United Technologies Corp. gained 5.3%. Shares of energy producers Exxon Mobil and Chevron helped boost the market.
GM filed for bankruptcy protection Monday in a move aimed at helping the once-mighty automaker emerge with only its more profitable plants, brands, dealerships and contracts.
GM's stock rose 18% earlier in the session. Analysts said the rally was related to short selling, a strategy that allows investors to sell stock they don't yet own and then buy it later when the price falls.
On Monday, investors were buying back shares to cover their short positions, driving up the price. Shares closed 8% higher.
According to the Wall Street Journal, GM stock will begin trading on the "Pink Sheets" on Tuesday morning. "Pink Sheets" allow for trading in certain stocks that are not listed on an exchange or the Nasdaq.
GM's bankruptcy filing occurred just hours after a U.S. Bankruptcy Court judge in New York approved Chrysler's sale of most of its assets to Italian carmaker Fiat.
Economically speaking, personal income rose 0.5% in April, the biggest increase in 11 months, the government reported Monday. But consumer spending dropped 0.1%.
The manufacturing sector contracted in May, but the pace of deterioration was slower than expected, according to an industry report.
The Institute for Supply Management said its index of national factory activity rose to 42.8 from 40.1 in April. Economists had expected the index to increase to 42, according to a survey by Briefing.com.
A reading below 50 in the index indicates the manufacturing sector is contracting. But May's gain puts the index over the tipping point that suggests expansion in the overall economy. A reading above 41.2%, over a period of time, is generally consistent with growth in gross domestic product.
In the United States, construction spending unexpectedly rose 0.8% in April, its biggest increase in eight months, the Commerce Department reported. Analysts had forecast spending to fall 0.8%.
Treasury prices fell, with the yield on the benchmark 10-year note rising to 3.71% from 3.46% Friday. Bond prices and yields move in opposite directions.
NYMEX oil for July delivery rose by $2.27 a barrel to settle at $68.58 U.S.
COMEX gold for August delivery fell 30 cents to close at $980 U.S. an ounce.
