08/30/2011 08:30 EDT | Updated 10/30/2011 05:12 EDT

Stock markets close higher on hopes for more economic stimulus; oil, gold higher

TORONTO - Stock markets closed closed higher on Tuesday as investors looked past a negative reading of American consumer confidence and focused on what the U.S. Federal Reserve could do to help keep the economic recovery from faltering.

The S&P/TSX composite index was the big gainer, thanks in part to strength in gold stocks and tech heavyweight Research In Motion Ltd., closing up 129.87 points to 12,634.71, while the TSX Venture Exchange gained 32.9 points to 1,802.76.

The Canadian dollar declined 0.11 of a cent to 102.23 cents US.

New York's Dow Jones industrial average was well off an early, triple digit slide, closing up 20.7 points to 11,559.95.

The Nasdaq composite index was up 14 points to 2,576.11 while the S&P 500 index rose 2.84 points to 1,212.92.

The U.S. Conference Board's consumer confidence reading for August came in at 44.5, down sharply from July's reading of 59.5 and lower than the 52 level that had been expected.

The consumer confidence survey was done at a time when worries about the possibility of another U.S. recession fuelled the wildest stock market swings since the financial meltdown in 2008.

"It’s a combination of everything we’re bombarded with, how negative everything is," said Chris Kuflik, wealth adviser at ScotiaMcLeod in Montreal.

"On the surface it doesn’t bode well for things going forward."

However, Kuflik cautioned that the index sometimes is "a false indicator ... with a bit of a disconnect in terms of confidence and what consumers are really doing."

Markets got a lift from the mid-afternoon release of the minutes from the U.S. Federal Reserve meeting from Aug. 9. They showed that some Fed officials pushed for a more aggressive response to the economy’s slowdown. They settled for a pledge to keep rates super-low for two more years and agreed to consider additional options at an extended meeting in September.

"Clearly, further steps will be on the table at that meeting and up for serious consideration," said CIBC World Markets chief economist Avery Shenfeld.

The tech sector was the leading group, up almost two per cent with Research In Motion Ltd. (TSX:RIM) up $1.93 to $31.91.

The financial sector was up 0.7 per cent even as Scotiabank's (TSX:BNS) quarterly earnings exceeded analyst expectations. Scotiabank’s third-quarter profits rose 18 per cent to $1.29 billion or $1.14 a share, two cents better than analyst expectations. Revenues increased to $4.3 billion from $3.78 billion and its shares climbed $1.15 to $53.50. CIBC (TSX:CM), which reports earnings on Wednesday, gained $1.16 to $73.06.

The TSX gold sector jumped about two per cent as the December bullion contract on the Nymex gained $38.20 to US$1,829.80 an ounce. Barrick Gold Corp. (TSX:ABX) was ahead 76 cents to C$49.76 and Goldcorp Inc. (TSX:G) was ahead 84 cents to $51.14.

The September copper contract in New York gained three cents to US$4.14 a pound and the base metals sector edged 1.5 per cent higher. Teck Resources (TSX:TCK.B) gained $1.50 to C$43.15 while Lundin Mining Corp. (TSX:LUN) declined 16 cents to $5.50.

The energy sector rose 1.17 per cent as oil prices improved despite the weak consumer report, with the October crude contract on the New York Mercantile Exchange up $1.63 to US$88.90 a barrel. Suncor Energy (TSX:SU) climbed 46 cents to $31.02 while Imperial Oil (TSX:IMO) improved by 44 cents to $39.49.

The strong showing on the TSX followed a 177-point jump Monday while the Dow industrials racked up 255 points amid a stronger than expected reading on consumer spending in July and relief that tropic storm Irene didn't cause even more damage.

But the TSX market is still down about 12.5 per cent from the highs of early March as investors fear the economy recovery has stalled.

"There isn’t a lot of conviction in the market but there are signs that the market had priced in a double dip recession scenario and maybe we’re not getting that," added Kuflik.

"We don’t know yet."

Traders also considered a report showing economic sentiment in the countries that use the euro currency was worsening due to uncertainties about the future of the global economic recovery and the region’s worsening debt crisis.

The European Union’s economic sentiment index fell by a greater-than-expected 4.7 points to 98.3 — the sixth consecutive decline, bringing the indicator below its long-term average of 100.

Germany, the eurozone’s largest economy, saw the biggest drop.

There is more top-drawer economic data coming out this week.

The Institute for Supply Management releases its take on the manufacturing sector Thursday. The index is expected to drift to 48, which would signal contraction. And the week ends with the U.S. non-farm payrolls report for August. It is expected the economy only managed to crank out about 80,000 jobs last month.

In other corporate news, Alimentation Couche-Tard (TSX:ATD.B) shares fell $1.23 to $28.50 after the convenience store operator missed expectations even though its net profit increased 9.9 per cent to US$139.5 million in the first quarter of its fiscal year. Revenues at the Quebec-based company, which reports in U.S. dollars, increased 24 per cent overall to US$5.18 billion.

Valeant Pharmaceuticals International Inc. (TSX:VRX) has emerged as a white-knight bidder for Afexa Life Sciences Inc. of Edmonton, maker of the Cold-FX flu remedy, with a friendly $76-million offer that tops a hostile bid by Paladin Labs Inc. Valeant shares slipped 19 cents to $43.35 while Afexa shares jumped 12 cents or 20.34 per cent to 71 cents.