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Traders work on the floor at the New York Stock Exchange, May 22, 2013. (BRENDAN MCDERMID/REUTERS)
Traders work on the floor at the New York Stock Exchange, May 22, 2013. (BRENDAN MCDERMID/REUTERS)

At midday: Bernanke ignites triple-digit gains for TSX, Dow Add to ...

North American stock markets surged Wednesday as the head of the U.S. central bank says prematurely ending its aggressive $85-billion-a month monetary stimulus program could lead to more harm for the world’s largest economy.

Federal Reserve chairman Ben Bernanke told the U.S. Congress that scaling back, or even stopping the stimulus, would be a bad idea because the U.S. job market still remains too weak.

Just before noon ET, the S&P/TSX composite index was up 120 points at 12,863. On Wall Street, the Dow Jones industrial average was ahead by 116 points at 15,504 and the S&P 500 was up 12 points at 1,681.

The Canadian dollar was down 0.56 of a cent to 96.83 cents US.

Bernanke said reducing the bond buyback program, which has kept borrowing rates low, would “carry a substantial risk of slowing or ending the economic recovery.”

He noted that although the economy is growing moderately this year and unemployment has fallen to a four-year low of 7.5 per cent, higher taxes and deep federal spending cuts are expected to slow economic growth this year.

Investors had been worried that the Fed could begin pulling back its monetary stimulus since recent data showed that outlooks for housing and jobs in the U.S. were rosier than expected.

It’s been replicated in some other countries, although not in Canada, and has resulted in stock markets flying upwards despite a patchy economic recovery in many parts of the world.

Over the past few weeks, a number of the world’s main markets, including the Dow Jones and Germany’s DAX have recorded a series of all-time highs, while others such as Japan’s Nikkei and Britain’s FTSE 100 have hit multi-year highs.

On the commodities front, June gold bullion was slightly ahead by 30 cents to $1,377.90 (U.S.) an ounce. The July crude contract was fell $1.05 to $95.13 a barrel and July copper climbed five cents to $3.39 a pound.

In corporate news, shares in Sears Canada Inc. (TSX:SCC) jumped 10 cents to $9.45 after the retailer reported a $31.2-million loss as well as lower revenue in its latest quarter. The loss amounted to 31 cents per share and contrasted with a year-earlier profit of $93.1-million or 91 cents per share, when its bottom line was boosted by an unusual gain. Sears says same-store sales fell by 2.6 per cent while total revenue fell to $867.1-million (U.S.) from $928.0-million a year earlier.

Meanwhile, U.S. retailer Target Corp. reported a 26 per cent drop in first-quarter profits and cut its outlook for the year as it blamed cool temperatures and financial pressures for pinching customers’ appetite for spending.

Shares in Target were down 3.24 per cent, or $2.28, at $68.99 (U.S.) after it reported a profit of $498-million, or 77 cents per share, for the three months ended May 4. That compared with $697-million, or $1.04 per share, a year earlier.

Meanwhile, shares of Lowe’s Cos. climbed 1.41 per cent, or 60 cents to $43.05 after its first-quarter net income rose nearly three per cent, but fell short of expectations as rainy weather hurt spring gardening sales.

The No. 2 home improvement retailer’s said it earned $540-million, or 49 cents per share. That compares with $527-million, or 43 cents per share, a year ago. Analysts polled by FactSet expected higher earnings of 51 cents per share for the world’s second-biggest home improvement retailer.

Overseas, the FTSE 100 was down 0.2 per cent at 6,790 while the DAX fell 0.3 per cent to 8,443. The CAC-40 in France was 0.6 per cent lower at 4,011.

Japan’s Nikkei 225 index up 1.6 per cent at 15,627.26, its highest close in more than five years after the Bank of Japan also concluded that it would be making no changes to its monetary easing stance.

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