* TSX rebound follows 3 percent fall in Monday’s session
* Key Toronto index now down 0.3 percent in January
* Rally driven by gains across all 10 sectors (Adds details, and comments)
By Frank Pingue
TORONTO, Jan 13 (Reuters) - Toronto’s main stock index closed sharply higher on Tuesday as investors raced back into equities after a string of selloffs had left the TSX at its lowest level in two weeks.
The heavyweight materials sector, which had spearheaded the index’s steep slide in the previous session, rebounded to lead Tuesday’s rally. The energy group, led by a 2.2 percent gain in EnCana Corp (ECA.TO) to C$56.08, also fueled the gain.
Toronto’s key index tumbled more than 3 percent on Monday to erase all of the gains it had made since the start of the year. Last week it was up 5.76 percent for the year.
“Energy and commodity stocks did quite well and that’s helped prop up the market,” said Elvis Picardo, analyst and strategist at Global Securities in Vancouver.
“So money is starting to come back to energy and materials because stocks in those sectors were hurt disproportionately during the market meltdown.”
The Toronto Stock Exchange’s S&P/TSX composite index .GSPTSE rallied 168.22 points, or 1.91 percent, to close at 8,961.55. That was 24 points off the session high of 8,986.15 the index reached shortly after midday.
A big boost came from the materials group as the same big-name gold mining shares that led recent declines rebounded as investors felt the downward moves were overdone.
The materials group, which accounts for about 20 percent of the overall Toronto index, led all sectors with a gain of 3.91 percent. The energy group followed with a 2.67 percent gain.
Yamana Gold (YRI.TO), which said it is back in the hunt for acquisitions, also chipped in as its shares rallied 2.4 percent to C$7.95.
Higher oil prices supported energy companies, whose shares were battered last year when slumping fuel demand due to the global slowdown sent oil prices down 54 percent from their record high of $147.27 a barrel last July.
Shares of Suncor Energy (SU.TO) closed 3.46 percent higher at C$27.48, while Petro-Canada PCA.TO shares rallied 5.35 percent to close at C$30.70.
The index’s broad-based rally was overdue according to some experts, who figured investors looked at the latest selloff as an opportunity buy depressed assets.
“We had a fairly big correction so we needed a bounce,” said John Ing, president of Maison Placements Canada. “But given the slew of circumstances there is a lot to be said that what we have seen and are experiencing is a dead cat bounce and lower lows will be tested.”
On Wall Street, stocks finished mixed on nagging concerns about the quarterly earnings that U.S. companies have started to report. A push by President-elect Barack Obama for the release of remaining financial rescue funds to stabilize credit markets helped improve sentiment.
The Dow Jones industrial average .DJI fell 25.41 points, or 0.3 percent, to 8,448.56, while the Nasdaq Composite Index .IXIC ended up 7.67 points, or 0.5 percent, at 1,546.46.
$1=$1.23 Canadian Reporting by Frank Pingue; editing by Peter Galloway