July 8, 2008 / 8:57 PM / 11 years ago

UPDATE 3-Toronto stocks bounce higher despite oil retreat

(Adds details, quotes)

* TSX recovers to end volatile session higher

* Broad gains offset weakness in energy sector

* WestJet up on codeshare deal with Southwest

By Leah Schnurr

TORONTO, July 8 (Reuters) - A late-day surge pulled the Toronto Stock Exchange’s main index higher on Tuesday as gains in the wider market offset a drop by energy shares, which were hit by another big drop in oil prices.

In a see-saw session, the index fell by more than 1 percent in the morning, undermined by declining commodity prices, following two days of steep losses.

The heavyweight energy sector came off its lows but was still down 1.3 percent as oil prices sagged more than $5 on a rallying U.S. dollar and easing concern over an Atlantic hurricane.

The TSX late rebound tracked a recovery in stocks south of the border, with investors scooping up recently downtrodden shares.

The decline in crude — which has fallen nearly $10 so far this week to just over $136 a barrel — also helped ease anxiety over rising inflation and improved hopes the Bank of Canada won’t need to raise interest rates next week, said Gavin Graham, chief investment officer at Guardian Group of Funds.

The S&P/TSX composite index .GSPTSE closed up 96.97 points, or 0.71 percent, at 13,809.77 with all but two of its 10 main sectors in positive territory.

The day’s rally pulled the benchmark away from official correction territory, but it remained down 8.8 percent from the all-time high it reached in early June. A “correction” is generally defined as a 10 percent retreat from peak levels.

Levente Mady, broker at MF Global Canada in Vancouver, noted that worries over global economic growth will remain a major headwind.

“All the fundamental news that I can see tends to be more negative, and I don’t expect that to change any time soon,” said Mady.

Shares of WestJet Airlines (WJA.TO) jumped C$1.41, or 11.1 percent, to C$14.10 after it forged a codeshare agreement with big U.S. carrier Southwest Airlines (LUV.N).

Under the deal, the two airlines will sell seats on each other’s flights, giving them access to new customers with lower marketing costs. WestJet’s gain help pull the industrials sector up 3.9 percent.

Gains by financials also helped push the benchmark higher. National Bank of Canada (NA.TO) rose C$1.69, or 3.5 percent, to C$50.54, and Bank of Montreal (BMO.TO) was up C$1.42, or 3.3 percent, at C$43.95. The group overall rose 2.1 percent.

Among the laggards in the oil patch, Canadian Natural Resources (CNQ.TO) was down C$3.46, or 3.8 percent, at C$88.88, and Canadian Oil Sands Trust COS_u.TO fell C$1.73, or 3.5 percent, to C$48.05.

Market volume was 405 million shares worth C$8.7 billion. Decliners outpaced advancers 1,073 to 542. The blue chip S&P/TSX 60 index .TSE60 closed up 8.51 points, or 1.04 percent, at 828.13.

In New York, stocks were boosted by the drop in oil prices, which eased worries about consumer and business spending.

The Dow Jones industrial average .DJI closed up 152.25 points, or 1.36 percent, at 11,384.21, and the Nasdaq composite index .IXIC rose 51.12 points, or 2.28 percent, at 2,294.44. (Editing by Rob Wilson) ($1=$1.02 Canadian)

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