TORONTO (Reuters) - Shaking off a weak start, the Toronto Stock Exchange’s main index pushed higher on Thursday, as investors scouted for bargains in shares that had been knocked down by worries over the global economy.
Gains were across the board as the market absorbed Wednesday’s half-point U.S. interest rate cut, which made for 1.25 percentage points in rate cuts in the United States in less than two weeks.
After slumping more than 170 points in the morning, the TSX rallied as investors bought into the energy, financial and materials sectors.
In individual moves, Potash Corp of Saskatchewan POT.TO added $6.39, or 4.7 percent, to $141.83, while Nova Chemicals Corp NCX.TO gained $1.74, or 6.4 percent, to $28.74 after the plastics maker swung to a fourth-quarter profit.
“A 1.25 percentage cut in interest rates in the U.S. is pretty dramatic, so principally I think that’s what’s doing it,” said Douglas Davis, president at Davis-Rea.
“I think what will happen is this will go on for a while and then the lows will be tested one more time at some point later in the year.”
The S&P/TSX composite index .GSPTSE closed up 156.89 points, or 1.21 percent, at 13,155.10, with all 10 of its main sectors in positive territory.
The financial sector, the biggest group on the index, rose 1.4 percent, with Canadian Imperial Bank of Commerce (CM.TO) up $4.55, or 6.6 percent, at $73.25, and Toronto-Dominion Bank gaining 76 Canadian cents, or 1.1 percent, to $68.01.
The financials followed the direction of the U.S. banking sector, which jumped as executives at bond insurer MBIA Inc (MBI.N) sought to reassure the market about the company’s outlook.
Concerns over the health of bond insurers are the latest worries to sting the financial sector. Bond insurers were used by some banks and financial companies to hedge investments in subprime securities, but investors have become nervous that these insurers now could also fail.
Financials were also helped by bargain-hunting as investors returned to the sector, which has been hurt by big writedowns, said Joe Ismail, technical analyst at Maison Placements Canada.
“It becomes tempting, even with the massive losses that they have declared, for the smart money that has a longer-term horizon to step up to the plate and position themselves to begin to nibble on these banks,” Ismail said.
The heavyweight energy sector moved up 1 percent, with Canadian Oil Sands Trust COS_u.TO up C$1.98, or 5.5 percent, at C$38.00. The trust reported after the market close on Wednesday that it had quadrupled its fourth-quarter profit.
On the downside, Petro-Canada PCA.TO was off $1.42, or 3 percent, at $45.63, despite reporting higher fourth-quarter profit amid higher crude production and prices.
Gildan Activewear Inc (GIL.TO) jumped $1.63, or 4.6 percent, to $37.09 the day after the T-shirt maker posted first-quarter profit that surpassed its earlier forecasts. The consumer discretionary sector was up 1.3 percent.
Despite the day’s gains, the index is down nearly 5 percent since the start of January, which has been a turbulent month for the TSX. The benchmark was clipped by five consecutive days of heavy losses, culminating in a 600-point dive, amid worries over the prospect of a U.S. recession and the impact that could have on demand for resources.
The index has climbed higher in three out of the past five sessions, and has bounced back by about 8 percent from January’s low of 12,132.13.
On Thursday, market volume was a strong 459 million shares worth $9.5 billion. Advancers outpaced decliners 971 to 627. The blue chip S&P/TSX 60 index .TSE60 closed up 10.14 points, or 1.33 percent, at 772.56.
In New York, stocks rose on MBIA’s reassuring words. The Dow Jones industrial average .DJI jumped 207.53 points, or 1.67 percent, at 12,650.36. The Nasdaq composite index .IXIC gained 40.86 points, or 1.74 percent, to 2,389.86.
Editing by Rob Wilson