The S&P/TSX composite index gained 50.02 points to 11,571.19.
Traders got over initial disappointment stemming from a failure by U.S. Federal Reserve chairman Ben Bernanke to reassure traders that more stimulus is coming to support a weakening economy.
Investors also took in a signal that the Bank of Canada is still leaning towards raising interest rates eventually, although it said the economic outlook is slightly weaker than in its previous forecast.
The Canadian dollar shook off early weakness to move up 0.21 of a cent to 98.76 cents US after the Bank of Canada said it was keeping its key rate unchanged at one per cent, reflecting a general slowing in global economic conditions. The bank also maintained language in its accompanying statement that signalled an eventual tightening bias, indicating that rates would rise at some point.
The TSX Venture Exchange gave back 6.6 points to 1,176.75.
U.S. indexes had initially reacted negatively after Bernanke told the Senate Banking Committee the Fed is prepared to take further action, but didn't spell out how or when. Bernanke also said that economic uncertainty is increasing, aggravated by the European debt crisis and the so-called fiscal cliff — where a variety of tax cuts expire and spending cuts take effect at the end of the year unless politicians can agree on alternatives.
Traders had hoped Bernanke would signal another round of stimulus in the form of bond purchases. A third round of quantitative easing would seek to push down long-term interest rates and encourage more borrowing and spending. The first two rounds triggered powerful rallies in the U.S. stock market.
"The big question here isn’t whether the Fed will act," said Randy Frederick, managing director of active trading and derivatives at Charles Schwab in New York. "We know they will. The question is how bad do things have to deteriorate before they act."
But the Dow Jones industrials finished well into positive territory, jumping 78.33 points to 12,805.54 as traders moved their focus to strong earnings reports and data showing a rise in industrial production. The Federal Reserve said factory output rose 0.7 per cent last month, after falling by the same amount in May. Factories produced more machines and vehicles used by businesses. Auto production rebounded after its first decline of the year.
The Nasdaq composite index was up 13.1 points to 2,910.04 and the S&P 500 index climbed 10.03 points to 1,363.67.
New York bank Goldman Sachs says its net income fell 11 per cent to US$962 million or $1.78 a share in the April-to-June period after the investment bank’s clients traded less and made fewer deals as global financial markets turned volatile. That’s far more than the $1.17 per share that analysts were expecting. Revenue also beat forecasts, even as it declined nine per cent to $6.63 billion and its shares climbed 30 cents to US$97.98.
Coca-Cola Co.’s second-quarter net income fell slightly from a year ago to US$2.79 billion or $1.21 a share, beating expectations by two cents. Revenue reached $13.09 billion from $12.74 billion and its shares rose $1.21 to US$77.69.
And after the close, chip giant Intel reported quarterly earnings per share of 54 cents US, two cents better than analysts expected. However, revenue fell short of estimates, coming in at US$13.5 billion. Its stock fell 1.7 per cent in after hours trading as Intel also said it sees third quarter revenue of $14.3 billion, down from estimates of $14.6 billion.
The TSX energy sector was the leading advancer, up 1.35 per cent with the August crude contract on the New York Mercantile Exchange ahead 79 cents to US$89.22 a barrel. Canadian Natural Resources (TSX:CNQ) improved by 83 cents to $27.31.
The industrials group was ahead just over one per cent as Canadian National Railways (TSX:CNR) rose 97 cents to $87.62.
The base metals sector was down 0.63 per cent as copper gave up early gains to decline three cents to US$3.46 a pound. Thompson Creek Metals Co. (TSX:TCM) was down 19 cents to C$2.56.
First Quantum Minerals Ltd. (TSX:FM) lost 33 cents to $16.64 as the miner said it is temporarily suspending operations at its Guelb Moghrein copper-gold mine in Mauritania due to strike action by some of its workers. The company says it is in the midst of a government-facilitated mediation process to resolve the strike.
The gold sector was down about 1.3 per cent as bullion declined $2.100 to US$1,589.50 an ounce. Barrick Gold Corp. (TSX:K) fell 31 cents to $35.08.
Traders also took in major dealmaking.
Quebec aerospace manufacturer Heroux-Devtek Inc. (TSX:HRX) is selling about one-third of its business for $300 million in cash. The deal affects Heroux-Devtek locations in Dorval near Montreal, Mexico, Texas and Ohio. Its stock soared $2.57 or 32.74 per cent to $10.42, off the day's high of $11.75.