Resource stocks led the way to a solid gain on the Toronto stock market Tuesday morning as commodity prices headed higher and a successful Spanish bond auction eased worries about the European debt crisis.
Traders also took in news that the Bank of Canada was leaving its key rate unchanged at one per cent, although the central bank hinted a hike is likely coming.
The S&P/TSX composite index jumped 134.97 points to 12,172.56 while the TSX Venture Exchange was down 12.91 points to 1,419.54.
The Canadian dollar shot up 1.29 cents to 101.32 cents (U.S.) after the Bank of Canada dropped hints that it may soon be time to raise interest rates. The bank said that's because economies around the world and in Canada are doing better than it previously thought and inflation is stronger.
The hint of a possible rate increase did nothing to dampen buying sentiment on the TSX Tuesday morning.
“Over the longer term, you will see an impact on equity markets when the market is overall convinced that rates are going higher for longer,” said Gareth Watson, vice-president at Richardson GMP Ltd.
“There may very well be one at the end of the year, if things go a lot better than expected, but we still have the view we're probably not moving on these rates until next year.”
U.S. markets were boosted by another round of earnings reports from the banking and consumer sectors and positive news from the housing industry.
The Dow Jones industrial average ran up 170.78 points to 13,092.19. The Nasdaq composite index gained 48.19 points to 3,036.59, and the S&P 500 index rose 18.08 points to 1,387.65.
Goldman Sachs Group Inc. said that its first-quarter profit rose to $2.11-billion (U.S.), or $3.92 a share, much higher than the $3.52 a share that analysts expected.
Total revenue fell 17 per cent to $9.9-billion, though that beat the $9.4-billion that analysts polled by FactSet had been expecting. Goldman also raised its quarterly dividend to 46 cents a share from 35 cents a share and its shares added 39 cents to $118.12 (U.S.).
The Coca Cola Co. said its net income rose eight per cent in the first quarter to $2.05-billion, or 89 cents per share, a cent higher than estimates. Its stock was up $2.03 to $74.47 (U.S.).
After the close, computer chip giant Intel Inc. will also unveil results.
Expectations for the first-quarter earnings season have been sharply ratcheted down after three years of strong double-digit growth.
Also, the U.S. Commerce Department said Tuesday that builders broke ground at a seasonally adjusted annual pace of 654,000 homes last month. That reading on housing starts is down 5.8 per cent from February. But building permits, a gauge of future construction, rose 4.5 per cent to a seasonally adjusted annual rate of 747,000. That's the highest level since September 2008.
There was relief on markets after Spain sold $3.2-billion (CAN) of short term debt amid strong demand but at much higher interest rates than just three weeks ago.
The Treasury paid a yield of 2.6 per cent on selling $2.1-billion (CAN) in 12-month notes compared to 1.4 per cent in the last such auction March 20. It paid 3.1 per cent to sell $1.1-billion in 18-month bills, up from 1.7 per cent.
Yields on Spanish bonds have been rising recently amid market skepticism that the country can manage its huge debts while enduring a second recession in three years.
The metals and mining sector led advancers, up about two per cent with copper prices ahead a penny to $3.64 (U.S.) a pound. Soft Chinese data have pushed prices down over eight per cent this month. HudBay Minerals (TSX:HBM) rose 53 cents to $11.04 while Sherritt International (TSX:S) gained 15 cents to $5.79.
The energy sector climbed 1.7 per cent as crude prices advanced with the May contract on the New York Mercantile Exchange ahead $1.61 to $104.54 (U.S.) a barrel. Imperial Oil (TSX:IMO) climbed $1.40 to $45.64 and Suncor Energy (TSX:SU) gained 79 cents to $31.60.
The prospect of higher interest rates helped send the financial sector up 0.5 per cent while TD Bank
“They are economically sensitive but also interest rate sensitive,” added Watson.
“Interest rates are basically how banks make money and if rates are going to go higher that means the prime lending rate will go higher.”
The gold sector improved by 0.5 per cent as bullion shed early losses and moved up $2.20 to $1,651.90 (U.S.) an ounce. Kinross Gold Corp. (TSX:K) climbed 11 cents to $9.46.
European bourses were positive amid positive data from the continent's biggest economy.
Germany's ZEW survey of investor optimism unexpectedly rose in April for a fifth straight month, rising to 23.4 from 22.3 in March. Analysts had expected a dip to 19.0, with some predicting a figure as low as 15.0.
London's FTSE 100 index gained 1.68 per cent, Frankfurt's DAX rose 1.33 per cent and the Paris CAC 40 climbed 2.45 per cent.