July 3, 2008 / 9:52 PM / 9 years ago

UPDATE 3-Toronto stocks rally late on banks, consumer issues

(Adds details, updates figures)

*TSX index rallies late after big early selloff

*Financial, consumer stocks rebound after recent losses

*Materials issues weigh on the market.

TORONTO, July 3 (Reuters) - The Toronto Stock Exchange’s main index rallied from early weakness to close more than 100 points higher on Thursday as investors scooped up hard-hit financial and consumer shares after data showing the U.S. labor market was holding up better than some had expected.

Following a steep, 400-point drop in the previous session, investors sought bargains among stocks that been hit hardest by worries about credit conditions and broader economic weakness.

The heavily-weighted financial issues sector, which has dropped 11 percent in the past two months, rose 2.51 percent during Thursday’s session, led by Canadian Imperial Bank of Commerce (CM.TO) and Bank of Montreal (BMO.TO).

“I think some people are slowly wading back in there, seeing if they can get some deep discounts on some of the financials,” said Andrew Martyn, portfolio manager at Davis Rea.

The S&P/TSX composite index .GSPTSE rose 109.46 points, or 0.78 percent, to close at 14,143.57.

The financial sector was helped by a U.S. Labor Department report that showed employers cut a net 62,000 jobs in June, roughly in line with expectations. Many had feared the jobs market could have deteriorated even more.

“You got a bit of a recovery on the idea that the U.S. economy wasn’t doing as badly,” said Gavin Graham, chief investment officer at Guardian Group of Funds.

Analysts said comments from the European Central Bank suggesting a less aggressive tone on interest rate increases also helped support Toronto stocks.

CIBC rose C$2.10, or 3.8 percent, to C$57.42, while BMO climbed C$1.57, or 3.8 percent, to C$42.99.

The sector’s rise was its biggest since a 3.28 percent rise on March 31.

Seven of the 10 TSX subgroups rose. Consumer discretionary issues rose 1.70 percent, powered by autoparts maker Magna International MGa.TO, which was up C$2.90, or 5 percent, to C$60.56.

Consumer staples climbed 1.46 percent, led by grocer Loblaw (L.TO), which rose C$1.07, or 3.6 percent, to C$31.09,

The blue-chip S&P/TSX 60 index .TSE60 was up 10.57 points, or 1.27 percent, at 846.10.

Analysts said thin volumes contributed to the volatility of the market, as many market players stayed home during a holiday-shortened week.

A total of 336.7 million shares were traded during the session, valued at C$6.8 billion. Despite the market’s positive move, the number of declining issues outnumbered advancers 1,011 to 543.

The mining-heavy materials sector eased for the second-straight session, but pared losses late to finish down 0.33 percent.

The sector leaped to a record high earlier this week, but dropped nearly 5 percent on Wednesday as investors became concerned that economic woes would hit demand for metals.

Leading the decline was Sherritt International (S.TO), which fell 94 Canadian cents, or 6.3 percent, to C$13.95, and Inmet Mining IMN.TO, which declined C$3.40, or 5.1 percent, to C$62.75.

The Toronto index was down as much as 347 points early in the session, but began to climb after slipping below the 13,800, a level that also formed a rough floor for the market in late April.

Canadian markets were closed on Tuesday for Canada Day, while U.S. markets closed early on Thursday and will remain shut on Friday for Independence Day.

In its shortened session, the Dow Jones industrial average .DJI rose 73.03 points, or 0.65 percent, to 11,288.54, while the Nasdaq composite .IXIC slipped 6.08 points, or 0.27 percent, to 2,245.38.

$1=$1.02 Canadian Reporting by Cameron French; Editing by Peter Galloway

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