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Toronto stock market advances after heavy losses, oil prices move higher

Malcolm Morrison, The Canadian Press

TORONTO - The Toronto stock market was higher Wednesday as investors tried to mount a relief rally after two days of punishing losses sparked by a collapse in oil prices to below US$50 a barrel and worries about the effects of such a decline.

The S&P/TSX composite index was up 97.99 points to 14,344.76 at mid-afternoon after plunging more than 500 points over the previous two sessions.

However, Kash Pashootan, portfolio manager at First Avenue Advisory in Ottawa, a Raymond James company, doesn't expect the positive mood to last long.

"On a day like today you see the investor (has) confidence in the overall market through this relief rally," Pashootan said.

"Until we get clarity, days like today will be few and far between — so enjoy them. But don’t expect them to last long until we get some sort of longer-term direction in terms of where (oil) supply is going."

The Canadian dollar was lower as data showed that falling oil exports in November helped push the merchandise trade deficit higher. It came in at $644 million in November, up from a revised $327 million deficit in October. The loonie was off 0.21 of a cent to 84.34 cents US.

U.S. indexes were higher as the release of the minutes from last month's U.S. Federal Reserve meeting reassured investors that the central bank likely will not raise rates sooner than generally expected, which is around the middle of this year. The Fed also made it clear that low inflation won't stop rate hikes. On an upbeat note, the minutes also said that the Fed sees foreign weakness as a risk to the U.S. economy but expects the huge drop in oil prices to be positive.

The Dow Jones industrials gained 188.19 points to 17,559.83, the Nasdaq climbed 46.8 points to 4,639.54 and the S&P 500 index was up 21.18 points to 2,023.79.

The TSX energy sector failed to benefit from the gain on the TSX, losing 0.05 per cent mid-afternoon while oil prices stabilized for the moment. The February crude contract in New York climbed 32 cents to US$48.25, off morning highs even as data from the U.S. Energy Information Administration showed that U.S. crude inventories declined by 3.1 million barrels last week. Analysts had expected supplies to increase by 380,000 barrels.

Prices have plunged 55 per cent since the highs of last June. Markets are dealing with an overabundance of supply, made worse by OPEC's refusal to cut production to support prices. But lower demand is also pressuring prices and there are worries that this reflects increasing weakness in the global economy.

Most sectors were higher with the consumer discretionary component up 1.75 per cent, telcos ahead 1.6 per cent and financials ahead 0.6 per cent.

The gold sector moved into positive territory, up 0.4 per cent even as gold prices backed off after charging ahead the previous three sessions as investors shunned riskier assets. The February contract faded $8.70 to US$1,210.70 an ounce.

The base metals group also declined, down 0.35 per cent as March copper drifted a penny lower to US$2.76 a pound.

Meanwhile, investors are also focused on U.S. employment. Two days before the release of the government's employment report for December, payroll firm ADP reported that the private sector created 241,000 jobs last month. Economists expect that a total of 240,000 jobs were created, down from 321,000 in November.