The S&P/TSX composite index was well off session highs by mid-afternoon, gaining 21.53 points to 12,233.95 following three days of losses. Markets have been depressed by fresh signs of a slowing economic recovery, including another downward revision of global growth by the International Monetary Fund and forecasts of lower demand by resource giant Alcoa Inc.
The TSX Venture Exchange was 2.21 points lower at 1,299.94.
Commodity prices also supported the Canadian dollar, which was up 0.21 of a cent at 102.18 cents US.
New York markets were also off the best levels of the day with the Dow Jones industrials down 18.58 points to 13,326.39 on top of two back-to-back, triple-digit slides. The Nasdaq composite index slipped 2.4 points to 3,049.38 while the S&P 500 index ticked up 0.28 of a point at 1,432.84.
Indexes had earlier been well into positive territory as a much better than expected read on U.S. jobless insurance claims raised hiring prospects. Traders also looked ahead to key earnings reports Friday from U.S. banking giants, including JPMorgan Chase and Wells Fargo.
The U.S. Labour Department said the number of people seeking unemployment aid plummeted last week by 30,000 to a seasonally adjusted 339,000, the lowest level in more than four years. The four-week average, a less volatile measure, dropped by 11,500 to 364,000, a six-month low.
Traders appeared to take in stride a move by Standard & Poor’s to cut its rating on Spain’s debt by two notches to BBB-minus, leaving the country on the verge of non-investment grade, or junk, status.
The Spanish government has so far refused to tap a new European Central Bank bond-buying facility that has been largely designed to keep a lid on the country’s borrowing rates. But some analysts think the downgrade will help push the government to finally request the help.
Even so, others think traders are in danger of letting their guard down.
"We probably don’t focus enough on Europe. I still think it’s simmering and could blow up in our face," said Jim Muir, director at Fraser Mackenzie.
"But we’re all growing very complacent with the problems over there. One day we’ll wake up and there could very well be another Lehman Brothers moment happen there. But history shows we do work our way through these problems."
Earnings expectations are low for the third quarter as the debt crisis continues to take a toll on the economies in Europe, affecting the results of multinationals. The malaise has also spread to developing economies such as China.
"Expectations are for a 2.1 per cent year-over-year decline in S&P 500 operating earnings — the first year-over-year drop since the recession," said BMO Capital Markets senior economist Robert Kavcic.
"Also, half of the 10 major sectors are expected to be in the red, so the earnings slowdown is relatively broad based and not just a one-sector phenomenon."
Merger and acquisition news also helped support markets.
The Wall Street Journal reported that Sprint Nextel is in advanced talks to be acquired by Japanese cellphone company Softbank Corp. in a transaction valued at more than US$12.8 billion. Sprint Nextel shares surged 14.09 per cent to US$5.75 in New York as the company confirmed during the morning that there have been talks with Softbank on a possible transaction.
Most TSX sectors were higher while resource stocks led gainers as prices for oil and metals advanced.
The energy sector was up 0.57 per cent as oil continued to find support from worries that the Syrian conflict is escalating. Traders worry that the civil war in Syria could grow into a wider regional conflict that could threaten oil supplies from Middle East producers. The Middle East and North Africa account for about a third of global oil production.
The November crude contract on the New York Mercantile Exchange was up 82 cents at US$92.07 a barrel. Canadian Natural Resources (TSX:CNQ) rose 21 cents to C$30.01.
Nexen (TSX:NXY) shares climbed six cents to $25.21 as the federal government extended its review period for the proposed $15.1-billion takeover of the energy company by China’s state-owned offshore oil company. The review under the Investment Canada Act is being extended by 30 days. An initial 45-day review period was set to end Friday.
The base metals sector was up 1.35 per cent as December copper climbed three cents to US$3.75 a pound. Teck Resources (TSX:TCK.B) ran ahead 49 cents to C$30.39.
The gold sector was flat as December bullion edged up $5.50 to US$1,770.60 an ounce.
NovaGold Resources Inc. (TSX:NG) gained 13 cents to C$5.04 as the company reported a third-quarter net loss of $21.5 million or eight cents per share. That is less than half of its net loss of $52.1 million or 22 cents per share from a year ago.
The exploration and development miner, whose flagship asset is its 50 per cent owned Donlin gold project in Alaska, did not report any revenues for the quarter.
Utilities were the biggest losers with Just Energy Group (TSX:JE) 31 cents lower to $10.55.