‘bounceback,’ u.s. Fed Statements boost tsx

Canada’s benchmark stock index posted its first positive close in four sessions, driven by solid earnings from U.S. companies including Caterpillar, and Apple Inc., which reported after the close on Tuesday.

The S&P/TSX closed at 12,111.06, up 130.96 points, or 1.09%. Eight of the 10 sub-indexes advanced, led by materials, up 2.73%, technology, which gained 2.57%, and energy, which rose 1.65%.

“What you’re generally seeing is a bit of a bounceback after a few days of selling,” Brian Huen, a managing partner at Red Sky Capital Management Ltd. in Toronto, told Bloomberg. “Earnings season seems to be in decent shape. The majority of companies are coming in better than expected, which is certainly helping sentiment today.”

The S&P/TSX had been in a positive holding pattern, along with U.S. indexes, while investors awaited statements from the U.S. Federal Reserve’s Open Market Committee, followed by a quarterly briefing. All markets continued to advance following the releases, in which the Fed essentially held its line on the state of the economy, saying it is growing gradually. Chairman Ben Bernanke said, however, that the central bank is “entirely prepared” to add more stimulus to the economy if necessary.

“The Fed sees the economy as making progress, and is prepared to embark on more unconventional monetary easing, but only if the unemployment rate starts to stray from its downward path,” said TD Economics economist Chris Jones. “Given that the labour market is making decent progress, risking higher inflation for faster gains in economic growth would, in the chairman’s own words, be ‘reckless’ and put the central bank’s credibility at stake.”

The Dow Jones increased its gains for the day following the Fed statements, closing at 13,090.72, up 89.16 points, or 0.69%, while the Nasdaq composite rose 68.03 points, or 2.30%, to 3,029.63.

“The Fed is providing an insurance policy to the economy,” Ann Miletti, senior portfolio manager for Wells Fargo Advantage Funds in Menomonee Falls, Wisc., told Bloomberg. “There’s a sense that things are improving, yet there’s some instability. The Fed is saying that it will be there to help keep things going.”

The price of crude oil rose Wednesday to US$104.12 a barrel, an increase of US57¢ a barrel, while gold fell US$1.60 to US$1,641.40 an ounce.

The Canadian dollar continued its advance, rising for the fourth consecutive session to close at US$1.0168, a gain of 46 basis points —a seven-month high against the U.S. greenback as investors embraced risk assets.

Canada’s junior Venture exchange eked out a small gain on Wednesday, rising 5.35 points or 0.39%, to 1,371.12.