TORONTO - The Toronto stock market returned to positive territory Wednesday afternoon after a strong earnings report from aluminum giant Alcoa Inc. raised hopes that the first-quarter earnings season won't be as bad as expected.
There was also relief on financial markets as bond yields for Italian and Spanish government debt eased.
The S&P/TSX composite index ran up 91.47 points to 12,026.76. The advance came a day after soft Chinese economic data, worries about the European debt crisis and apprehension about earnings pushed the main index below the 11,955 mark where it started 2012 trading. The TSX Venture Exchange was ahead 4.02 points to 1,435.12.
The Canadian dollar slipped 0.01 of a cent to 99.58 cents US.
U.S. markets were sharply higher after the largest U.S. aluminum manufacturer said Tuesday after the market close that it earned 10 cents a share in the first quarter against expectations of a four cent a share loss. Alcoa is considered a barometer for the U.S. economy as it sells its aluminum to a wide range of customers.
Alcoa also reaffirmed its forecast of a seven per cent increase in 2012 global aluminum demand and its shares closed up 6.22 per cent at US$9.90 in New York.
The Dow Jones industrials rose 89.46 points to 12,805.39.
The Nasdaq composite index gained 25.24 points to 3,016.46 and the S&P 500 index climbed 10.12 points to 1,368.71.
Markets also found support from the U.S. Federal Reserve’s latest survey of business conditions.
The so-called Beige Book said that each of the Fed’s 12 bank districts grew at a modest to moderate pace from mid-February through April 2. And the survey noted that hiring was steady or increased in most of the country.
The U.S. Labour Department said last week that hiring slowed in March to half the pace from the previous three months. But the Fed survey, which is anecdotal, didn’t reflect that slowdown.
Traders have also been apprehensive about how the first-quarter earnings season will play out and the Alcoa report helped settle nerves.
Analyst expectations for earnings for companies in the Standard & Poor's 500 index went from anticipation of an increase of about three per cent early in the quarter to an expected decline of 0.1 per cent, according to FactSet.
Such a dip would follow three straight years of strong double-digit earnings growth.
"For this cycle, I think we have seen peak earnings, peak profitability," said Paul Vaillancourt, CEO of Canadian Wealth Management in Calgary.
"But companies are not going to start losing money this quarter, it’s just the rate of growth will decelerate. And so you won’t see the same quarter over quarter, year over year growth in earnings but that’s what happens at this stage in the recovery."
He said what is important is that the U.S. economic recovery has become self-sustaining "and that’s what really matters."
Sentiment also improved after a European Central Bank official reportedly indicated the ECB could resume its bond-purchase program in order to keep yields from rising to unacceptable levels.
On Tuesday, Spain saw its 10-year bond yield hit four-month highs of over 5.9 per cent. The rate rises when investors become more worried about a country’s finances. The yield on 10-year Spanish bonds in the secondary market dropped back to 5.89 per cent Wednesday.
Yields on 10-year Italian government bonds had added as much as 0.31 of a point on Tuesday but yields on Wednesday relaxed by 0.09 of a point at 5.5 per cent.
On the TSX, the industrials sector rose about 1.75 per cent as Canadian National Railways (TSX:CNR) climbed $1.79 to $77.84 while Canadian Pacific Railway (TSX:CP) improved by $1.14 to $74.40.
Commodities were mixed after demand concerns had sent prices for oil and metals lower on Tuesday.
The May crude contract on the New York Mercantile Exchange gained $1.68 to US$102.70 a barrel and the energy sector climbed 1.47 per cent. Suncor Energy (TSX:SU) rose 44 cents to C$30.12 while Cenovus Energy (TSX:CVE) was up 52 cents to $33.90.
Copper prices added to Tuesday's losses, closing a penny lower at US$3.64 a pound. Prices for copper, which is viewed as an economic barometer as it is used in so many businesses, have tumbled about seven per cent in the past week amid soft Chinese economic data. But the base metals sector was ahead 1.67 per cent as Teck Resources (TSX:TCK.B) advanced 57 cents to C$35.37 and HudBay Minerals (TSX:HBM) climbed 24 cents to $10.51.
The gold sector was the only decliner, down 1.4 per cent as bullion slipped 40 cents to US$1,660.30 an ounce. Barrick Gold Corp. (TSX:ABX) faded 49 cents to C$41.22 while Kinross Gold Corp. (TSX:K) shed 19 cents to $9.21.
Romania’s environment minister says an application by Gabriel Resources Ltd. (TSX:GBU) for permits to move ahead with a controversial gold mine can’t be speeded up as requested. Opponents say building the open-pit mine would damage ancient monuments and destroy a mountain face. Gabriel shares dipped eight cents to $3.17.
In Canadian earnings news, Astral Media Inc. (TSX:ACM.A) had a $38.2-million profit in its second quarter, a 10 per cent increase over the same period a year earlier. Revenue rose to $233.5 million from $232.7 million and its shares added three cents to $48.50.
Dollarama Inc. (TSX:DOL) says its net income soared 51 per cent to $63.6 million or 84 cents per diluted share in its fiscal fourth quarter, up from $42 million or 56 cents per share a year earlier. The discount chain's sales jumped 14.7 per cent to $468.7 million. Its shares gained $3.34 to $51.70.