TORONTO - North American stock markets bounced off multi-year lows Tuesday to close sharply higher.
Buyers were encouraged by an assessment from U.S. Federal Reserve chairman Ben Bernanke that "there is a reasonable prospect" the recession will end this year.
"It wasn't much but remember we have had a lot of down days and it's hardly true that a one-day rebound marks a dramatic turning point in sentiment," said Avery Shenfeld, senior economist at CIBC World Markets.
A day after falling by 302 points to levels not seen since 2003, Toronto's S&P/TSX composite index closed up 211.66 points at 7,859.33. The gains would have been even higher if not for a selloff in the gold sector.
The TSX Venture Exchange slipped 25.35 points to 853.59.
The Canadian dollar rose 0.51 of a cent to 80.43 cents US.
New York's Dow Jones industrial average was up 236.16 points to 7,350.94 after a 251-point loss Monday took the blue-chip index to 1997 levels.
The Nasdaq composite index rose 54.11 points to 1,441.83 while the S&P 500 was up 29.81 points to 773.14.
Bernanke told the Senate Banking Committee that the American economy is likely to keep shrinking in the first six months of this year. But he also said he would use all available tools to help end the economic slide later this year.
He added that any turnaround will hinge on the success of the Fed and the Obama administration in getting credit and financial markets to operate more normally.
Bernanke's assessment helped take the sting out of dismal economic data.
The New York-based Conference Board said that its Consumer Confidence Index, which was down slightly in January, plummeted more than 12 points in February to 25, from the revised 37.4 last month. That was well below the 35.5 level that economists expected. A year ago, the consumer confidence reading stood at 76.4.
The TSX financial sector gained 7.2 per cent after a dip into the red during the morning amid ongoing worries about American banks being nationalized.
"If you do have the nationalization of some major European and American banks, I think the belief is that they will no longer be on equal footing -- and access to capital will be cheaper and so on for others," said Paul Vaillancourt, director of asset allocation at Franklin Templeton Managed Investment Solutions.
He added that earnings expectations are low for Canadian banks. There are unlikely to be dividend cuts and core earnings will be "solid" but show little or no growth "because not only is the possibility increased of loan loss provisions and things like that, but in this market... they are having to attract capital with fairly high rates."
TD Bank (TSX:TD), which reports fiscal 2009 first quarter earnings Wednesday, gained $2.45 to $35.25 and Royal Bank (TSX:RY), which releases results Thursday, was up $2.66 to $28.48.
Wealth-management company CI Financial Corp. (TSX:CIX.UN) reported Tuesday a fourth-quarter profit of $53.2 million, down 72 per cent from a year-earlier as market volatility and the impact of its switch to a corporation from an income fund eroded earnings.
Meanwhile, American bank J.P. Morgan Chase & Co. has slashed its quarterly dividend in a move that will save it around US$5 billion a year and added that its first quarter has been "solidly profitable" so far. The firm cut its quarterly payout to five cents a share from 38 cents but its shares rose $1.51 to US$21.02 as investors were comforted by the fact the Wall Street financial giant was shoring up its balance sheet.
The energy sector moved 5.47 per cent higher as oil prices advanced. The April crude contract on the New York Mercantile Exchange gained $1.52 to US$39.96 a barrel and EnCana Corp. (TSX:ECA) rose $1.33 to C$46.11 on the TSX while Canadian Natural Resources (TSX:CNQ) was up $3.20 to $39.74.
The base metals sector was up 3.4 per cent amid an announcement that HudBay Minerals (TSX:HBM) and Lundin Mining (TSX:LUN) have scrapped their friendly merger deal, although HudBay will keep its 19.9 per cent ownership stake in Lundin. HudBay shares jumped 60 cents to $5.38 while Lundin shares fell seven cents to 73 cents.
The April bullion contract on the New York Mercantile Exchange was down $25.50 to US$969.50 and the gold sector fell nine per cent on the TSX. Barrick Gold Corp. (TSX:ABX) faded $5.43 to C$39.25.
On the earnings front, Magna International (TSX:MG.A) shares were up $2.16 to $34.31 in Toronto after the auto parts giant reported a net loss of US$148 million in the fourth quarter, reversing a year-earlier profit of $28 million. It expects 2009 to be worse for the auto industry.
Thomson Reuters Corp. shares (TSX:TRI) jumped $3.24 or 11.47 per cent to $31.49 after the Toronto-incorporated provider of professional and financial information said its fourth-quarter profit grew by more than half from a year ago, blowing past market expectations.
Home Depot Inc., North America's largest home improvement retailer, reported a fiscal fourth-quarter loss of US$54 million Tuesday mostly due to its plan to shut its four smaller home-improvement brands. Its shares were $1.96 higher to US$20.67 in New York.
