TORONTO - North American stock markets racked up solid gains for a second day in a row Tuesday as investors hoped that dismal U.S. consumer sentiment and housing data would further convince the Federal Reserve to cut interest rates sharply on Wednesday.
"The market is just in a holding pattern,'' said Todd Leone, managing director of equity trading at Cowen & Co. in New York.
"It seems we've hit a short-term bottom, and the market has been stabilizing as we wait to hear what the Fed says.''
Higher financial and energy stocks helped send Toronto's S&P/TSX composite index 59.53 points higher to 13,046.43.
The Canadian dollar closed above parity with the U.S. dollar for the first time since Jan. 3, moving up 0.49 cent to 100.05 cents US after running up as high as cents US.
Higher commodity prices helped strengthen the loonie Tuesday but Fed meeting also played a big role in supporting the loonie.
"We now have the broad consensus that the (U.S. Federal Reserve) will cut tomorrow by 50 basis points (half a percentage point), highlighting the interest rate advantage the Canadian dollar will have over the U.S. dollar, going forward,'' said Matthew Strauss, senior currency analyst at RBC Capital Markets.
The TSX Venture Exchange moved 5.42 points lower to 2,552.38.
In New York, the Dow Jones industrials moved up 96.41 points to 12,480.3 on hopes that the Fed will follow up last week's surprise three quarters of a point cut in rates with a half-point drop to try to keep the U.S. out of a housing sector-led recession.
The Nasdaq composite index gained 8.15 points to 2,358.06. The S&P 500 index added 8.34 points to 1,362.3 as the U.S. Conference Board said that its consumer confidence index dropped to 87.9 in January from a revised 90.6 in December. The reading was slightly below expectations.
The consumer confidence index has been weakening since July.
Earlier, the U.S. Commerce Department reported that demand for durable goods shot up 5.2 per cent last month, a far larger increase than the 1.8 per cent rise expected.
However, there were weak spots that bolstered confidence the Fed will continue to aggressively cut interest rates.
"For instance, manufacturing employment tumbled, manufacturing hours worked were lower, the Institute for Supply Management manufacturing index slid into sub-50 territory (showing contraction) and manufacturing production was flat in the month,'' observed Royal Bank economist Rishi Sondhi.
"As a result, today's report does not alter our expectation that the Fed will undertake further aggressive easing this week with the Fed funds rate expected to drop 50 basis points.'
Investors also took in another helping of bad housing sector news.
The Standard & Poor's/Case-Shiller 10-city composite home price index showed U.S. home prices plunged by a record 8.4 per cent in November, marking two years of slowing returns.
On the earnings front, Dow Chemical Co. said Tuesday its fourth-quarter earnings fell 52 per cent to US$472 million due to restructuring. However, excluding one-time charges, earnings per share came in at 84 cents, four cents better than analysts had expected.
A strong earnings report from Canadian Pacific Railway Ltd. helped boost the TSX industrial sector 2.27 per cent.
The railway said its fourth-quarter profit soared to $342 million from a year-ago $146 million, thanks mainly to lower future Canadian income tax rates. For the full year, net income improved 19 per cent to $946 million. CP shares rose $2.36 to $67.26.
Elsewhere in the sector, Canadian National Railway advanced $1.14 to $50.32.
The financial sector moved up 0.9 per cent as Royal Bank shares rose 28 cents to $49.98 even as its chief financial officer said the bank will take a further writedown related to its exposure to a U.S. bond insurer that's in financial difficulty. Janice Fukakusa said that the mark-to-market value of the exposure was $104 million at the end of October, when the bank's 2007 financial year and fourth quarter ended.
CIBC moved ahead $2.42 to $70.55.
The energy sector drifted 0.67 per cent higher as oil prices rose ahead of inventory data coming out Wednesday from the U.S. Department of Energy. The March crude contract on the New York Mercantile Exchange climbed 65 cents to US$91.64 a barrel. Petro-Canada gained 43 cents to $47.19 while EnCana Corp. added 47 cents to $64.63.
Energy company TransCanada Corp. said fourth-quarter earnings jumped 27 per cent to $377 million while full-year profit was up five per cent. Its shares rose 88 cents to $38.88.
Gold prices retreated somewhat from Monday's record intraday high, with the February bullion contract in New York down $2 to US$925.10 an ounce. The TSX gold sector eased 1.28 per cent with Kinross Gold down 62 cents to $21.95.
Goldcorp Inc. shares were 80 cents lower to $37.64 after analysts suggested the company may be looking to sell its stake in Silver Wheaton Corp. to cash in on high silver prices and have more cash available to fund its capital expenditure over the next few years. The comments followed an unconfirmed report that the Vancouver gold miner is considering selling its remaining 49 per cent stake in the silver company for about $1.8 billion. Silver Wheaton shares declined 58 cents to $16.31.
In other corporate news, Canadian dairy giant Saputo Inc. has struck a US$160-million deal to acquire cheese maker Alto Dairy Co-operative, based in Waupun, Wis. Its shares climbed $1.05 to $27.52.
Goldnev Resources Inc. shares fell back 42.25 per cent to 30.5 cents Tuesday, giving up some of the spectacular gains they made after the company released positive results from the Pasquia Hills oil shale drilling program. They traded even higher early in the Tuesday session, rising to a multiyear high of 63 cents in the first hour of trading before falling back.
On the TSX, advances beat declines 857 to 710 with 208 unchanged as 361.4 million shares traded worth $6.4 billion.
