01/10/2012 08:23 EST | Updated 03/11/2012 05:12 EDT

Resource stocks to provide lift to TSX as Alcoa Inc. beats revenue estimates

TORONTO - The Toronto stock market closed at a two-month high Tuesday after better-than-expected revenue figures from resource giant Alcoa Inc. pushed commodities higher and helped investors look past signs of a slowing Chinese economy.

The S&P/TSX composite index closed well off session highs, coming down from a 150-point jump but still ahead 73.94 points to 12,270.66. The TSX Venture Exchange rose 14.75 points to 1,542.23.

The Canadian dollar moved higher amid stronger commodity prices, rising 0.57 of a cent to 98.33 cents US.

New York's Dow Jones industrials closed ahead 69.78 points to 12,462.47, the Nasdaq composite index gained 25.94 points to 2,702.5 and the S&P 500 index climbed 11.38 points to 1,292.08.

Alcoa (NYSE:AA) shares were in New York after the aluminum giant reported Monday that its quarterly revenue beat analyst expectations, rising six per cent to US$5.99 billion. Analysts surveyed by Thomson Reuters expected revenue of $5.7 billion.

However, Alcoa turned in a quarterly loss of $191 million as a sluggish global economy hurt aluminum demand across a broad range of businesses from automobile manufacturing to construction, its first dip in the red since 2009.

Analysts also pointed to Alcoa's forecast calling for world consumption growth of aluminum this year of seven per cent.

"That implies pretty healthy demand," said Robert Gorman, chief portfolio strategist, TD Waterhouse.

"And from a pricing standpoint, if their forecasts were correct, they're saying that rather than having surplus aluminum production around the world, which was around 150,000 tons in 2011, there will be a deficit of 600,000. So that implies firmer pricing for them and that would be good."

Alcoa is considered an economic bellwether because its products are used in a wide range of businesses such as aircraft, automobiles, commercial vehicles like semitrailers, construction and pipe for the oil and gas industry. About half of its sales are in the U.S. and an additional 27 per cent are in Europe.

Traders also took in news that China's import growth decelerated sharply in December in a new sign the world's second-largest economy is slowing, in part because the government has been dealing with high inflation, particularly for food.

The customs agency said December imports rose 11.8 per cent over a year ago, down from November's 22.1 per cent gain. Exports rose 13.4 per cent, down only marginally from the previous month's rate. The data raised hopes that Chinese central bankers will be loosen lending requirements.

The country's politically sensitive global trade surplus widened to $16.5 billion.

China has been a major prop in helping the global economy recover since the financial crisis of late 2008, driving up prices for oil and metals and commodity stocks on the resource-heavy TSX.

Commodity prices advanced with the February crude contract on the New York Mercantile Exchange gaining 93 cents to US$102.24 a barrel. The TSX energy sector ran ahead just shy of one per cent while Suncor Energy (TSX:SU) improved by 91 cents to C$32.82 and Imperial Oil (TSX:IMO) gained 61 cents to $47.08.

Shares in Nexen Inc. (TSX:NXY) advanced $1.33 to $18.40 as the oil and gas giant announced the departures of president and CEO Marvin Romanow and Gary Nieuwenburg, executive vice-president of Canada. Nexen had reported that its net profits were cut by nearly two thirds on lower production and falling sales in the quarter ended Sept. 30.

The base metals sector climbed 3.22 per cent as copper prices were also higher as the March contract climbed 10 cents to US$3.51 a pound. Teck Resources (TSX:TCK.B) rose $1 to C$38.65 and First Quantum Minerals (TSX:FM) advanced $1.52 to $23.10.

Inmet Mining Corp. (TSX:IMN) shares added 23 cents to $65.63 as it said Korea Panama Mining Corp. will exercise an option to take a 20 per cent interest in its Cobre Panama project, leaving Inmet with an 80 per cent stake.

February gold rose $23.40 to US$1,631.50 an ounce, pushing the TSX Global gold index up about 0.75 per cent. Barrick Gold Corp. (TSX:ABX) climbed 35 cents to C$49.22.

The financials sector also provided lift, rising 0.23 per cent with Bank of Montreal (TSX:BMO) up 30 cents to $58.24.

Traders were also encouraged as Fitch ratings agency said that France was unlikely to lose its AAA credit rating this year.

Fitch's head of sovereign ratings David Riley also said the agency will give its verdict on several euro countries by the end of January. Fitch currently has Italy, Spain, Belgium, Ireland, Slovenia and Cyprus on so-called "ratings watch negative" and Riley said the reductions could be up to two notches.

In Canadian earnings news, quarterly profits at Corus Entertainment Inc. (TSX:CJR.B) came in at C$91.2 million, or 61 cents per share, beating average analyst estimates of 59 cents per share. The results marked an increase from $90.7 million, or 58 cents per share, a year earlier. Revenues rose seven per cent to $236.9 million. Corus shares shed early momentum and declined 67 cents to $20.67.

Elsewhere, shares in Lululemon Athletica Inc. (TSX:LLL) surged $6.26 or 11.45 per cent to $60.95 after the yoga-inspired retailer raised its profit and revenue estimates. It also expects diluted earnings will be about seven cents per share higher than previously estimated, in a range of 47 cents to 49 cents per share.