TORONTO - A broad-based increase among Canadian stocks and news that U.S. investment bank Lehman Brothers will sell part of its business sent Toronto's main index up sharply Wednesday after days of losses amid jitters about the financial and energy sectors.
Toronto's S&P/TSX composite index rose 332.35 points to 12,479.11, with all sub-indexes up, after losing almost 500 points on Tuesday and coming close to the stock market's lows for the year.
New York indexes were higher after Lehman said will sell a majority stake in its investment management unit after losing US$3.9 billion in the third quarter.
The TSX Venture Exchange was down 35.85 points to 1,585.41 and the Canadian dollar fell 0.15 cent to 93.56 cents US.
The Dow Jones industrial average rose 142.33 points to 11,373.06 while the Nasdaq composite index gained 37.06 to 2,246.87 . The S&P 500 index was up 18.12 to 1,242.63.
Unease about the No. 4 securities firm in the United States touched off heavy selling Tuesday as investors worried that it had few options to raise capital.
Wall Street has worried about the financial sector since the near-collapse and subsequent sale of Bear Stearns Cos. in March.
"Frequently, when you get days of very big losses there's a reaction subsequently to reconsider the downward movement; you see some type of rally,"said Meny Grauman, senior economist at CIBC World Markets.
"In this type of environment it seems like it's still a little bit short-lived - we've seen quite a number of bounces and the market has been quite volatile over the last few weeks."
Investors seemed encouraged that Lehman was close to a deal to sell a majority stake in its investment management business and bring in much-needed capital.
"Yesterday, towards the end of the day, there was some bad news regarding Leham Brothers ... and concern over a failed deal that would have seen them being sold to a Korean bank," Grauman said.
"This morning we got an early peak into their results for the quarter and some news about the restructuring so it seems like that has sort of eased fears that were surrounding that bank in particular but were also affecting financials in general and weighing on the markets. The prospect of another U.S. investment bank going under was seen as a big risk factor for the markets and the economy as a whole."
Wednesday's gains were driven by the energy sector, which moved up more than three per cent as EnCana Corp. (TSX:ECA) rose $1.89 to $68.99, after the U.S. Energy Department reported larger-than-expected drops in the nation's crude and gasoline inventories.
The TSX has sustained severe losses as oil and materials stocks, which make up about half of the Toronto stock market, have been sliding amid a sharp move away from commodities.
The price of oil, one of the most influential determinants of the direction of the Toronto stock market, fell as strength in the U.S. dollar and indications of a weakening economy overshadowed OPEC's decision to cut back excess production.
Light, sweet crude for October delivery fell 26 cents to $103 a barrel on the New York Mercantile Exchange closer to midday. The contract fell $3.08 overnight to settle at $103.26, the lowest close since April 1.
The gold sector rose 3.5 per cent even as the December bullion contract on the Nymex fell $34.70 to US$758.30 an ounce. Goldcorp (TSX:G) rose $1.09 cents to $28.03.
The base metals sector was up four per cent per cent as Teck Cominco Ltd. (TSX:TCK.B) climbed 95 cents to $35.26.
The financial sector was up three per cent as TD Bank (TSX:TD) climbed $1.97 to $63.78.
In economic news, Statistics Canada said the labour productivity of Canadian businesses has fallen for a third-straight quarter, down 0.2 per cent in the second quarter of the year, driven by the mining and oil and gas extraction industries, as well as construction.
On the corporate side, Ford Canada will phase out a third shift at the body and paint shops at its Oakville, Ont., and eliminate about 500 jobs. The cutback follows an earlier decision by Ford to scrap a third shift in the plant's final assembly operation and comes amid a deep slump in the U.S. market.
Continued strength in the global agricultural sector powered grain distributor Viterra Inc. (TSX:VT) to a 70 per cent increase in third-quarter profit to $166.7 million, the company said Wednesday. Its shares rose four cents to $10.25.
Travel company Transat A.T. Inc. (TSX:TRZ.B) reported a third-quarter net loss of $2.4 million, reversing a year-ago $16.1-million profit, as tour operators were unable to adjust prices to keep up with surging fuel costs. Stock in the company traded at $17.170, down 76 cents. Its stock fell 43 cents to $17.50.
Ur-Energy Inc. (TSX:URE) said it now expects first production from its Lost Creek uranium project in Wyoming will be delayed to the second half of 2010, due to a slower-than-anticipated licensing process at the U.S. Nuclear Regulatory Commission. Its stock fell 23 cents to 93 cents.
Microsoft Corp. had the official opening for its first Canadian development centre in the Vancouver suburb of Richmond, B.C., which employs 300.
