The S&P/TSX composite index closed up 51.88 points to 12,568.77, with strong support from base metal stocks as investors continued to buy up oversold miners.
The Canadian dollar was down 0.45 of a cent to 96.02 cents US as the Bank of Canada kept its key rate unchanged at one per cent and indicated it is in no rush to raise rates.
U.S. indexes were slightly higher amid remarks from Federal Reserve chairman Ben Bernanke that the Fed could slow the pace of a key element of economic stimulus later this year if the economy strengthens. But Bernanke cautioned that the Fed wants to see substantial progress in the job market before scaling back its US$85 billion in monthly bond purchases.
The Dow Jones industrial gained 18.67 points to 15,470.52, the Nasdaq rose 11.5 points to 3,610 and the S&P 500 index gained 4.65 points to 1,680.91.
Bernanke also said in testimony before a congressional committee that the Fed's timetable for reducing its bond purchases is not on a "preset course". And he said the Fed could increase or decrease the amount based on how the economy performs.
Markets went through weeks of volatility after Bernanke first mentioned in late May that the Fed could start tapering its bond purchases, which have kept interest rates low and fuelled a rally on stock markets, later this year and wind it up by the middle of next year.
Since then, the Fed has tried to soothe nerves by stressing that the Fed won’t pull back on its stimulus unless the evidence was clear that the economy and the job market were improving as much as the Fed had forecast.
"The Federal Reserve cried wolf a little bit by suggesting several times that tapering was to come and the market interpreted that as tapering is going to come sooner rather than later," said Kash Pashootan, vice president and portfolio manager at First Avenue Advisory in Ottawa, a Raymond James company.
"And then we reset that by starting to suggest in their wording that it will come but it is not going to be as close as we thought. So the markets rallied off of that but most of that is priced into the market."
Investors also had a number of major U.S. earnings reports to digest.
Bank of America earned US$3.6 billion or 32 cents a share in the quarter after payments to preferred shareholders, up 70 per cent from a year ago. The results were seven cents higher than analysts had forecasted and its shares were up 39 cents to $14.31.
After the close, Intel posted quarterly earnings of 39 cents a share, which met estimates. Its shares moved down 1.7 per cent in after hours trading in New York.
On the economic front, the Fed said in its latest regional survey that it sees the overall economy growing at a modest to moderate pace, although there is also some reluctance to hire full-time workers. The Fed also said six districts reported faster growth in multi-family construction.
Other data showed U.S. builders started work on fewer homes and apartments in June. However, the slowdown wasn’t enough to suggest the housing recovery is faltering.
Developers began construction at a seasonally adjusted annual rate of 836,000 homes in June, nearly 10 per cent below May’s total of 928,000, which was revised higher.
Most TSX segments were positive and financials narrowly led advancers, up 1.05 per cent rose per cent with Royal Bank (TSX:RY) ahead $1.22 to $63.80 while Scotiabank (TSX:BNS) gained 91 cents to $58.04.
The base metals sector ran up 0.95 per cent even while September copper on the Nymex dipped six cents to US$3.13 a pound. First Quantum Minerals (TSX:FM) advanced 37 cents to C$16.15 and Rio Alto Mining (TSX:RIO) ran up 11 cents to $2.30. The segment has been strengthening over the last couple of weeks, up 10.9 per cent from its lows of the year from late last month, despite weak copper prices.
The industrials group rose 0.88 per cent as Canadian Pacific Railway (TSX:CP) gained $1.53 to $133.30.
Tech stocks also lifted the TSX as BlackBerry (TSX:BB) improved by 15 cents to $9.64.
The energy sector edged up 0.44 per cent while the August crude contract in the New York Mercantile Exchange moved 48 cents higher US$106.48 a barrel. Canadian Natural Resources (TSX:CNQ) was ahead 44 cents to C$33.37.
The gold sector lost about 2.65 per cent as August bullion shed early gains to move down $12.90 to US$1,277.50 an ounce. Barrick Gold (TSX:ABX) faded 28 cents to C$16.34 and Kinross Gold Corp. (TSX:K) gave back 15 cents to $5.15.