Canadian stocks have turned into positive territory on Monday, recouping most of last week's slide. Rising gold prices and positive ISM data from the U.S have provided a spark.
Shortly before the close of the first session of the week, the S&P TSX Composite index had gained 151.56 points, or 1.4%, to 11,057.14. The market dropped more than 2.6% last week, hurt in part by a dismal U.S. jobs report.
Gold stocks were up as the precious metal surged higher on the Comex. New Gold rallied 6.4% to $4.16, Agnico-Eagle Mines climbed 2.7% to $71.17 and Eldorado added 2% to $11.66.
Mining stocks have gained ground, too, as copper prices turned into positive territory. Inmet gained 5.4% to $58.50, First Quantum prospered 2.75% to $66.80 and Teck Resources was up 1.5% to $28.88.
In corporate news, Canadian Hydro Developers rallied 4.4% to $5.23 after the company agreed to be acquired by TransAlta for $5.25 per share in cash. This is upwardly revised from the previous offer of $4.55 per share. TransAlta sneaked ahead 0.2% to $21.17.
Research in Motion slid 1.1% to $70.03, despite being upgraded to "buy" from "hold" at Needham & Co.
Ivanhoe and Rio Tinto are expected to sign a deal with the Mongolian government tomorrow to develop a copper-gold project, according to reports. Ivanhoe jumped 2.4% to $13.95.
Meanwhile, Ciena Corp. is in talks to acquire part of struggling technology company Nortel Networks.
The Canadian dollar picked up 0.97 cents to 93.35 cents U.S.
ON BAYSTREET
All 14 TSX subgroups ended up in the black. Gold shone brightest, gaining 2.3%, followed by metals and mining, up 2.1% and energy stocks, ahead 1.9%.
The TSX Venture Exchange regained 10.13 points to 1,254.25, while the Nasdaq Canada index was up 4.48 to 689.23.
ON WALLSTREET
In New York, stocks rallied Monday afternoon as investors used a two-week selloff as an opportunity to jump back into the market.
The Dow Jones Industrials gained 112.08 points on the day, or 1.2%, to 9,599.75. The S&P 500 index marched ahead 15.24 points, to 1,040.45. The Nasdaq composite index picked up 20.04 points to 2,068.15.
A better-than-expected reading on the services sector of the economy and strong demand for Treasury's first bond auction of the week bolstered the broad-based gains.
Bank stocks led the advance, with Bank of America up 3%, JPMorgan Chase up 4% and Wells Fargo up 5%.
A roughly seven-month-long rally hit a roadblock at the end of September, with stocks falling for two straight weeks, and the major gauges losing around 5%. The declines were driven by a series of weaker-than-expected economic reports on housing, manufacturing, consumer confidence and employment.
The weak batch of reports marked a reversal after a period of steadily improving economic news.
That raised more worries that the rally has gotten ahead of the recovery. Still, the declines over the last two weeks were pretty minimal, considering the runup that preceded them.
One expert said that the last two weeks of the old quarter and first two of the new one are typically something of a "Never-Never Land" for the market, as investors await results and focus 100% on economic news. He said that this was true in the month surrounding the end of the second quarter and start of the third in July and it appears to be true again now.
Since bottoming at a 12-year low March 9, the S&P 500 has gained 51.2%, and the Dow has gained 45% as of Friday's close. After hitting a six-year low, the Nasdaq has gained nearly 61%.
In the third quarter alone, the S&P 500 index and the Dow both jumped 15%, the best quarterly performance in a decade. The Nasdaq jumped 15.7%, its best quarterly performance since 2003.
The wave of third-quarter earnings reports due in the week ahead will determine whether the selloff continues or proves to be an entry point for more buyers. Alcoa unofficially begins the third-quarter reporting period Wednesday, as it usually does. The Dow aluminum maker is due to report a quarterly loss versus a profit a year ago, reflecting a weak materials sector.
Overall, S&P 500 profits are expected to have dropped almost 25% from the third quarter of 2008.
In addition to financials, the Dow's other big gainers included Boeing, United Technologies, 3M, Caterpillar, Chevron, Exxon Mobil and Hewlett-Packard. Of the 30 Dow components, 22 gained.
Among stock movers, Brocade Communications rallied 15% in unusually active trading on reports that it has put itself up for sale. Both Hewlett-Packard and Oracle were cited as potential buyers, according to the Wall Street Journal.
Economically speaking, the nation's service sector expanded in September for the first time in more than a year, according to a report from a purchasing managers' group released Monday.
The Institute for Supply Management's non-manufacturing index rose to 50.9 last month from 48.4 in August. Economists surveyed by Briefing.com had expected a reading of 50, which is the point at which the index reflects expansion.
It was the second consecutive month of improvement in the index, which last indicated expansion in August 2008.
The services sector, which includes businesses such as banks, airlines and restaurants, makes up the bulk of economic activity in the United States.
The ISM's new orders index rose 4.3 points to 54.2, while the business activity index added 3.8 points to 55.1.
Treasury prices moved slightly higher, dropping the yield on the benchmark 10-year note to 3.21% from Friday’s 3.22%. Treasury prices and yields move in opposite directions.
The price of a barrel of oil regained 46 cents worth of momentum to $70.37 U.S.
Gold prices surged $14 to $1,018 U.S. an ounce.
