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At midday: TSX up as resource stock gains offset pot pullback

A file photo from the TMX Broadcast Centre in downtown Toronto in 2013.

Fernando Morales/The Globe and Mail

Canada's main stock index rose on Thursday as gains for energy companies, financial stocks and some miners offset a pullback in marijuana producers and a slip in Shaw Communications Inc after its quarterly earnings disappointed.

At 11:27 a.m. ET, the Toronto Stock Exchange's S&P/TSX composite index was up 40.49 points, or 0.25 per cent, at 16,288.44.

Half of its 10 main sectors were in positive territory, while advancing issues barely outnumbered decliners overall.

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The energy group climbed 2.2 per cent, as crude oil prices pushed higher, with Cenovus Energy Inc up 4.4 per cent at $13.69 and Canadian Natural Resources Ltd rising 1.8 per cent to $46.61.

The most influential weights on the index included Shaw Communications, which fell 3.4 per cent to $26.99 after reporting quarterly earnings that missed expectations.

Marijuana producers, a volatile but broadly rising sector, also weighed, with Aphria Inc down 9.8 per cent at $20.36 and Canopy Growth Corp off 9 per cent at $38.17.

The materials group, which includes precious and base metals miners and fertilizer companies, added 0.6 per cent.

Alamos Gold Inc fell 5.9 per cent to $7.47 while Yamana Gold Inc rose 3.5 per cent to $4.14 after each miner provided a business update to investors.

U.S. stocks rose on Thursday as a jump in oil prices lifted energy stocks to their best day in more than a week and upbeat forecast from No. 2 U.S. carrier Delta Air Lines boosted other airline stocks.

Chevron rose about 2 per cent and Exxon 1 per cent, lifting the S&P energy index 1.45 per cent to its best percentage gains since Jan. 3.

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Delta Air Lines rose 1.3 per cent after reporting upbeat quarterly profit as well as forecast, helped by higher business fares in a busy holiday season.

That helped the Dow Jones U.S. Airlines index up 1.94 per cent.

"You see this continued rotation into stocks that will accelerate with the economy," said Michael Antonelli, managing director of institutional sales trading at Robert W. Baird in Milwaukee.

"Energy is in a good space with crude above 64 bucks and you have industrials being driven by airlines stocks."

The Dow Jones Industrial Average was up 103.3 points, or 0.41 per cent, at 25,472.43 and the S&P 500 was up 8.25 points, or 0.30 per cent, at 2,756.48.

The Nasdaq Composite was up 22.22 points, or 0.31 per cent, at 7,175.79.

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The gains come a day after the indexes snapped their rally for the first time in 2018, over speculations that China would slow U.S. government bond purchases and that U.S. President Donald Trump would end a key trade agreement.

The focus turned to fourth-quarter earnings, which will get into full swing on Friday with the big U.S. lenders.

Earnings for S&P 500 companies are expected to increase by 11.8 per cent on an average, with the biggest contribution from the energy sector, according to Thomson Reuters I/B/E/S.

"Expect some irregularities with respect to earnings in the quarter, but investors are looking beyond the impact of tax and how it hits the bottom line," said Massud Ghaussy, director at Nasdaq Advisory Services.

Wal-Mart Inc, the world's largest retailer, said it would raise entry-level wages for hourly employees to $11 an hour in February as a result of corporate tax cuts.

Xerox shares jumped 4 per cent after the Wall Street Journal reported the copier maker was in deal talks with Japanese camera maker Fujifilm Holdings that could include a change in control of Xerox.

U.S. producer prices fell in December for the first time in nearly 1-1/2 years amid declining costs for services, which could temper expectations that inflation will accelerate in 2018.

Other data showed the number of Americans filing for unemployment increasing for the fourth straight week to more than a three-month high.

Oil prices surged to their highest since 2014 on Thursday on tightening global crude stocks and after OPEC members said they would stick with output cuts for now despite gains in Brent to nearly $70 per barrel.

Brent crude futures hit $69.88, their highest since December 2014. The contract was trading at $69.70, 50 cents above the last close.

U.S. West Texas Intermediate (WTI) crude futures surged to $64.77, also the highest since December 2014, before edging back to $64.42, 85 cents above the last close.

Sentiment received a boost from a surprise drop in U.S. production and lower U.S. crude inventories.

"The steady, if not rapid, decline in U.S. crude oil inventories from persistently high refinery demand and elevated exports has firmly registered with the market," said John Kilduff, partner at Again Capital LLC in New York.

Data from the U.S. Energy Information Administration showed that crude inventories fell by almost 5 million barrels to 419.5 million barrels in the week to Jan. 5.

U.S. production declined by 290,000 barrels per day (bpd) to 9.5 million bpd, the EIA said, despite expectations of output breaking through 10 million bpd.

The drop in production, likely to be because of extremely cold weather that halted some onshore output in North America, was expected to be shortlived.

Analysts said U.S. stock draws were driving the market.

"(U.S.) crude oil inventories are at their lowest level since August 2015," said PVM Oil Associates analyst Tamas Varga. "OPEC is edging ever closer to its desired target of reducing OECD industrial stocks to the five-year average."

On Thursday, UAE oil minister and current OPEC president Suhail al-Mazrouei said he expects the market to balance in 2018 and that the producer group is committed to its supply-reduction pact until the end of this year.

Production cuts led by the Organization of the Petroleum Exporting Countries and Russia, which are set to continue throughout 2018, have underpinned prices.

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