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By Leah Schnurr
TORONTO, Jan 10 (Reuters) - The Toronto Stock Exchange’s main index recovered from big early losses and finished higher on Thursday as banking and resource issues were encouraged by expectations of further interest rate cuts following comments made by U.S. Federal Reserve Chairman Ben Bernanke.
Financials led the way up, gaining 1.5 percent. Canadian Imperial Bank of Commerce (CM.TO) was among the biggest net gainers, rising C$2.34, or 3.4 percent, to C$71.34.
“People get a general sense that the Federal Reserve when they meet are going to cut (interest rates) by 50 basis points,” said Ian Nakamoto, director of research at MacDougall, MacDougall & MacTier. “There was some talk that it was only going to be 25, but I think most people now believe it’s going to be 50 basis points.”
“Definitely the tone was that (Bernanke) was going act fairly aggressively to stem the downturn in the economy,” Nakamoto added.
Bernanke said in remarks to a housing and finance group that the U.S. economic outlook was worsening and that the Fed was ready to act aggressively.
After swinging 100 points both up and down, the S&P/TSX composite index .GSPTSE closed up 62.69 points, or 0.46 percent, at 13,642.63. Eight of the TSX’s 10 main groups were in positive territory.
“What we’ve been most used to recently has been the fact that the market has been very, very reactive to any news, good or bad,” said Michael Sprung, president at Sprung & Co. Investment Counsel.
The index had been earlier knocked down by persistent jitters of more fallout from the credit crunch after a profit warning from U.S. credit card issuer and banking firm Capital One Financial Corp (COF.N)
The materials sector, home to resource shares, rose 0.6 percent, while the gold-mining subsector gained 1.6 percent as the price of bullion surged to a record high after Bernanke’s comments.
Kinross Gold (K.TO) was up 97 Canadian cents, or 4.4 percent, at C$22.83, and Alamos Gold AGI.TO rose 39 Canadian cents, or 6.3 percent, to C$6.59.
Silver Standard Resources Inc SSO.TO SSRI.O climbed C$1.44, or 3.9 percent, to C$38.21 after the miner said it had found a new gold-and-copper zone at its Snowfield project in northern British Columbia.
On the downside, the energy sector was the biggest drag, shedding 1.3 percent, amid lower oil prices and concerns that energy demand could be staunched by an economic slowdown.
Jean Coutu Group PJCa.TO rose despite a dive in its second-quarter profit, which analysts said had been largely expected. Shares of the drug store chain ended up 53 Canadian cents, or 5.2 percent, at C$10.69.
Shares of sporting goods retailer Forzani Group Ltd FGL.TO rose 50 Canadian cents, or 3.2 percent, to C$16.11 after it said sales in the 10-week holiday season rose 21 percent over the year before.
Market volume was 421 million shares worth C$7.8 billion. Advancers outpaced decliners 880 to 735. The blue chip S&P/TSX 60 index .TSE60 closed up 3.51 points, or 0.44 percent, at 801.73.
Financial stocks south of the border also rose after news that Bank of America BAC.TO is in advanced takeover talks with beleaguered mortgage lender Countrywide Financial Corp CFC.N.
The Dow Jones industrial average .DJI finished up 117.78 points, or 0.92 percent, at 12,853.09, while the Nasdaq Composite Index .IXIC rose 13.97 points, or 0.56 percent, to 2,488.52.
$1=$1.01 Canadian Editing by Peter Galloway