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By Leah Schnurr
TORONTO, March 18 (Reuters) - The Toronto Stock Exchange’s main index rallied on Tuesday with bank stocks powering higher after an aggressive interest rate cut in the United States and on bargain-hunting after the previous day’s losses.
Although the 75-basis-point cut by the U.S. Federal Reserve was less than the full percentage point that some had hoped for, investors cheered it as another move to stave off a U.S. recession.
Banking stocks, which have been battered by the faltering U.S. subprime mortgage market, led the way up, gaining 4.1 percent. The sector also benefited from bargain-hunting after the group slid in a broad market selloff on Monday.
The major banks were among the biggest weighted advancers on Tuesday, including Canadian Imperial Bank of Commerce (CM.TO), which rose C$3.81, or 6.7 percent, to C$60.75, and Royal Bank of Canada (RY.TO), up C$2.21, or 5 percent, at C$46.53.
Sal Masionis, stockbroker at Brant Securities, said that there is a feeling that recent rate cuts from the Fed as well as moves to make sure financial institutions have access to liquid funds will start to ease some of the pressure of tightness in global credit markets.
”(Interest rates) have dropped 200 basis points in two months,“ Masionis said. ”This is huge, but obviously the system is in quite bad shape and there’s a lot of nervousness because we don’t know what’s behind each company.
The S&P/TSX composite index .GSPTSE closed up 184.55 points, or 1.42 percent, at 13,136.70 with all but two of its 10 main sectors on the upside.
A 1.4-percent gain in the oil and gas sector pushed the benchmark higher, while the price of oil was also boosted by the Fed’s action. Imperial Oil (IMO.TO) rose C$1.73, or 3.4 percent, to C$53.35, and Canadian Natural Resources (CNQ.TO) was up C$1.38, or 2 percent, at C$71.03.
Also on the upside, Research In Motion RIM.TO, the maker of the BlackBerry, jumped C$6.07, or 6.2 percent, to C$104.15.
The industrials sector added 2.5 percent, while Canadian National Railway (CNR.TO) rose C$2.09, or 4.4 percent, to C$49.12 after it unveiled regional spending plans for track and infrastructure work. Elsewhere in the sector, Bombardier (BBDb.TO) gained 36 Canadian cents, or 7 percent, to C$5.54.
But on the downside, the materials sector slid 2.4 percent, pulled lower by a sharp 5.6 percent fall in shares of gold producers as U.S. gold futures retreated in after-hours trading. Barrick Gold (ABX.TO) was down C$2.91, or 5.6 percent, at C$49.28, and Kinross Gold (K.TO) fell C$1.77, or 6.8 percent, to C$24.15.
Sherritt International (S.TO) gave up C$1.31, or 8 percent, to C$15.10 after it said it will buy out the share of Royal Utilities Income Fund RU_u.TO that it doesn’t already own for about C$700 million.
Shares of HudBay Minerals (HBM.TO) fell 30 Canadian cents, or 1.8 percent, to C$16.50 after the zinc and copper producer said its fourth-quarter profit skidded 83 percent due to lower zinc prices and strength in the Canadian dollar.
Market volume was 409 million shares worth C$7.7 billion. Advancers outpaced decliners 821 to 789. The blue chip S&P/TSX 60 index .TSE60 closed up 13.08 points, or 1.72 percent, at 773.39.
On Wall Street, stocks surged after the interest rate cut and strong results from two top investment banks. The Dow Jones industrial average .DJI rose 420.41 points, or 3.51 percent, to 12,392.66, and the Nasdaq Composite Index .IXIC rose 91.25 points, or 4.19 percent, to 2,268.26.
$1=$0.99 Canadian Editing by Peter Galloway