Stock markets rise, strong manufacturing report raises hopes for U.S. recovery

The Canadian Press ~ The News
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TORONTO - The Toronto stock market started a fresh trading month with a solid advance Monday as commodity prices ran up smartly and new data made investors feel better about the American economy.
The S&P/TSX composite index surged 223.24 points to 11,317.55. The Canadian dollar was up 0.61 of a cent to 94.13 cents US.
Investors were encouraged by the U.S. Institute for Supply Management's manufacturing index for January, which came in at 58.4, showing stronger expansion than the expected reading of 55.6.
"This was an unambiguously strong report," said TD Securities Economics strategist Millan Mulraine.
"And with the rebound in economic activity and the weak U.S. dollar likely to remain supportive ... we expect the rebound in the U.S. manufacturing sector to be sustained."
The strong data was especially welcome after stock markets had a shaky start to the New Year despite a generally positive fourth-quarter earnings season. The main TSX index fell 5.5 per cent in January and the Dow Jones industrials stepped back 3.5 per cent as investors questioned the durability of the economic recovery.
"I think what we're seeing is that we're in a deeper, nastier, more difficult recession than we thought or at least we were led to believe at one point," said John Stephenson, portfolio manager at First Asset Funds Inc.
"In spite of good earnings numbers, the market is looking through those numbers and just shaking it off and selling the market down at any opportunity. I think times are pretty tough these days, it's going to be a struggle."
The TSX energy sector moved 2.49 per cent higher as oil prices rose following four days of declines. The March crude contract on the New York Mercantile Exchange climbed $1.54 to US$74.43 a barrel.
Suncor Energy (TSX:SU) rose $1.08 to C$34.84 while Canadian Natural Resources (TSX:CNQ) climbed 76 cents to $69.01.
The February bullion contract on the Nymex was up $21.30 to US$1,104.30 an ounce, taking the gold sector up 4.93 per cent. Barrick Gold Corp. (TSX:ABX) was up $1.68 to C$38.80 while Goldcorp Inc. (TSX:G) advanced $1.57 to $37.81.
The base metals sector rose 4.99 per cent, with March copper ahead three cents at US$3.10 a pound. Teck Resources Ltd. (TSX:TCK.B) rose $1.69 to C$36.70 and FNX Mining (TSX:FNX) rose 63 cents to $12.69.
The financial sector was also supportive, up 0.88 per cent as Royal Bank (TSX:RY) rose 54 cents to $52.82 and Manulife Financial (TSX:MFC) advanced 39 cents to $19.93.
A major loser on the TSX was Cinram International (TSX:CRW.UN), one of the world's biggest DVD manufacturers. Its units plunged $1.75 or 60.14 per cent to $1.16 after Warner Home Video announced it was ending its agreement with the Toronto-based supplier. Cinram estimates about 28 per cent of its revenue last year came from Warner Home Video.
The TSX Venture Exchange moved up 17.79 points to 1,509.94.
Another report showing personal income rose more than expected in December also helped boost New York markets. The U.S. Commerce Department says incomes rose by 0.4 per cent in December, the sixth increase in a row. That's better than analysts' expectations of 0.3 per cent growth.
Consumer spending, however, increased by 0.2 per cent, less than analysts' forecasts of 0.3 per cent.
New York's Dow Jones industrial average rose 118.2 points to 10,185.53.
Other data showed that U.S. construction spending dropped 1.2 per cent in December to its lowest level in more than six years as new home building fell by the steepest amount in seven months.
The Nasdaq composite index moved 23.85 points higher to 2,171.2 while the S&P 500 index added 15.32 points to 1,089.19.
Investors were also looking ahead to the U.S. non-farm payrolls report for January which comes out Friday. A modest gain of 20,000 jobs is expected for the month.
But some analysts suggested that gain wouldn't be as reassuring as it looks on the surface.
"The only reason why the consensus is forecasting a net job gain is because of the census hiring, which will temporarily add as many as one million jobs through to April," said David Rosenberg, chief economist at Gluskin Sheff.
"But the market will look through that and what it means is that ADP, private payrolls, hours worked and the diffusion index will take on more importance."
The ADP employment report only measures job growth in the private sector.
Canadian jobs data also comes out Friday. It is expected the economy will have created 15,000 jobs during January.
Investors are still taking in company earnings reports for the last quarter.
Exxon Mobil Corp. shares rose $1.75 to US$66.18 after the company reported that fourth-quarter net income fell 23 per cent to US$6.05 billion, or US$1.27 a share, beating expectations of US$1.17 a share. Revenue rose to US$89.8 billion from US$84.7 billion.
In other corporate news, Toyota Canada will install a steel reinforcement bar to fix a sticky accelerator pedal problem that has been blamed for unwanted acceleration in some vehicles and resulted in a massive recall of 270,000 in Canada. About 4.3 million Toyotas have been affected worldwide. In New York, Toyota shares were up $2.95 to US$79.95.
Shares in MagIndustries Corp. (TSX:MAA) rose five cents to 57 cents after the Toronto-based company signed a framework agreement with a Beijing-headquartered construction company, which is negotiating to build and find up to US$1.2 billion in financing for the proposed Mengo potash project in western Africa.

Organizations: TSX, S&P, Dow Jones U.S. Institute for Supply Management Cinram International First Asset Funds Warner Home Video New York Mercantile Exchange Suncor Energy Canadian Natural Resources Nymex Barrick Gold Goldcorp Inc. Teck Resources FNX Mining Manulife Financial U.S. Commerce Department Gluskin Sheff Exxon Mobil Corp. Toyota Canada MagIndustries Corp.

Geographic location: U.S., TORONTO, New York Canada Beijing Africa

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