TORONTO - The Toronto stock market roared ahead for the second straight day Wednesday, followed by the biggest single-day surge for the Canadian dollar, as the U.S. Federal Reserve cut its key interest rate by half a point to its lowest levels in years.
The market and currency gains were rooted in sharply higher oil prices as a weaker American dollar helped to push up commodity prices.
The Canadian dollar ended the day up 3.67 cents US to 81.63 cents US, its biggest one-day move up since mid-1970. Earlier in the day it had gained as much as 4.5 cents US.
"This is very much a story of a weaker U.S. dollar, talk of Japanese rate cuts yesterday plus expectation for a hefty 50 basis point cut we saw today by the Fed," said Michael Gregory, senior economist at BMO Capital Markets.
"All contributed to a weaker American currency and Canada strengthened by default, along with the support it got indirectly with stronger commodity prices."
New York markets were up strongly but moved mainly lower in the closing moments of the session after the Fed lowered its key rate to one per cent and noted that the pace of economic activity has slowed markedly since its last meeting.
Toronto's S&P/TSX composite index jumped 349.93 points to 9,501.56 after surging 614 points on Tuesday, adding up to a gain of 964 points or 11 per cent for the last two sessions. However, the index is still down about 19 per cent this month.
The Dow Jones industrial average lost 74.16 points to 9,990.96 after soaring 889 points Tuesday as traders counted on a rate cut of at least half a point.
"Intensification of financial market turmoil is likely to exert additional restraint on spending, partly by further reducing the ability of households and business to obtain credit," the Fed said in an accompanying statement.
The rate cut is calculated to stimulate the U.S. economy by making borrowing less costly but it will also reduce foreign investors' appetite for American debt and dollars.
The Toronto energy sector rose 8.6 per cent as the December crude oil contract on the New York Mercantile Exchange shot up $4.77 to US$67.50 on hopes that markets have priced in the worst of a global economic slowdown.
EnCana Corp. (TSX:ECA) climbed $3.70 to $59.20.
The TSX Venture Exchange advanced 41.38 points to 858.32.
However, despite the positive action on the TSX, there wasn't a lot of conviction that equity markets have turned the corner.
"I'm not sold on the euphoria just yet, still a bit early to say we're out of the woods," said Adrian Mastracci, portfolio manager at KCM Wealth Management in Vancouver.
"I do think we're marching towards a bigger slowdown globally, so today may not look so bad but I'm expecting more bad news before I get some good news."
New York's Nasdaq composite index moved up 7.74 points to 1,657.21 while the S&P 500 dipped 10.47 points to 930.07.
This was the second time this month the Fed has cut interest rates to cushion the effects of a global slowdown. Along with other western central banks including the Bank of Canada, the Fed cut its key rate by half a point on Oct. 8.
China cut key interest rates Wednesday for the third time in six weeks in a bid to spur its economic growth amid fears of a global recession that would hit its vital exports.
Meanwhile, the U.S. commerce department reported that orders for durable goods rose 0.8 per cent in September. Orders had been expected to fall 1.5 per cent.
The TSX also found support from the financial sector, up 1.15 per cent with Royal Bank (TSX:RY) up 43 cents to $45.43.
But Manulife Financial (TSX:MFC) shares were up $1.81 to $25.30 on reports the Office of the Superintendent of Financial Institutions is changing rules governing how much money insurers must put aside for their segregated funds business.
The gold sector advanced 8.5 per cent as the price of gold gained $13.50 to US$754. Goldcorp Inc. rose $2.85 to $23.50.
The base metals group was up 9.4 per cent as copper rose 22.95 cents at US$2.088 a pound. Teck Ltd. (TSX:TCK.B) climbed 86 cents to $12.35.
Shares in Sherritt International (TSX:S) gained 53 cents to $4.60 as it said it is "suspending significant expansion initiatives" while reporting third-quarter earnings more than doubled to $133.1 million.
BCE Inc. (TSX:BCE) reported third-quarter earnings of $248 million, down from $406 million a year earlier as Canada's largest telecommunications company booked costs from a purge of 2,500 managers. BCE shares declined 60 cents to $34.37.
In the oilpatch, Nexen Inc. (TSX:NXY) said its third-quarter earnings more than doubled from a year earlier to $886 million, with higher prices driving sales up by more than half to $2.21 billion.
Nexen shares ran ahead $2.35 to $18.60.
Suncor Energy Inc. (TSX:SU) reaped the benefits of previously high oil prices despite lower production volumes, and its third-quarter earnings rose to $815 million from $627 million. Suncor shares rose $2.61 to $28.01.
Maple Leaf Foods Inc. (TSX: MFI) has reported a summer-quarter net loss of $12.9 million. Its shares advanced 23 cents to $7.40.
On the TSX, advances beat declines 871 to 390 with 173 unchanged.
