Source: The Canadian Press

Financial stocks led the way to a positive close on the Toronto stock market Friday following a strong earnings report from U.S. bank J.P. Morgan Chase.

The S&P/TSX composite index ran up 62.58 points to 13,464.06 while the TSX Venture Exchange lost 18.04 points to 2,270.96.

The resource-heavy TSX was held back by sliding mining stocks as the latest moves by China to slow its economy and rein in inflation have raised concerns about demand for commodities.

The Canadian dollar closed well off the lows of the day as oil prices moved into positive territory. The loonie finished down 0.02 of a cent at 101.07 cents US after going as low as 100.22 cents US.

China’s central bank has raised the amount of money banks must keep in reserve for the seventh time in a year. It has ordered state-owned banks to set aside an additional 0.5% of deposits as reserves, effective Jan. 20.

China’s inflation rate jumped to a 28-month high of 5.1% in November.

Investors have usually reacted negatively in the short-term to these Chinese moves to slow the economy since strong demand from that country and other emerging markets was largely responsible for the TSX gaining 14% in 2010.

“Any interest rate hike or tightening initiatives taken on by the Chinese government is going to raise some concerns that there could be an accelerated slowdown in Chinese growth and that will hinder their growth for Canadian companies,” observed Jenn Dowty, portfolio manager at Manulife Asset Management.

However, Dowty added that she doesn’t expect the negative sentiment to persist.

“There is the appreciation that while we’re seeing some tightening in China, there is still some fantastic growth in the market. Certainly after the market digests the initial negative news, the market then looks forward and says we still have great growth here in these emerging markets, particularly in China.”

The financial sector moved up 1.76% after J.P. Morgan Chase said its fourth-quarter profit jumped 47% to US$4.83 billion, or US$1.12 a share, as it set aside less money to cover loan losses. Analysts had forecast the bank would earn US$1 per share. Its stock rose 46 cents to US$44.91.

Royal Bank (TSX:RY) gained 94 cents to C$53.89 and TD Bank (TSX:TD) pulled up $2.09 to $76.17.

The gold sector was the leading decliner as easing concerns about European sovereign debt problems helped push bullion prices sharply lower with the February contract on the Nymex down $26.50 at US$1,360.50 an ounce.

Goldcorp Inc. (TSX:G) lost $1.39 to C$40.17.

Kinross Gold Corp. (TSX:K) shares were down 43 cents at $16.62 after it said Friday it produced between 2.3 million and 2.35 million gold equivalent ounces for 2010, in line with earlier guidance.

The base metals sector declined 0.81% as the March copper contract on the New York Mercantile Exchange gained 14 cents to US$4.41 a pound. Teck Resources (TSX:TCK.B) declined 82 cents to C$62.22 while Western Coal Corp. (TSX:WTN) fell 24 cents to $12.45.

Elsewhere in the sector, ArcelorMittal and its rival for control of Baffinland Iron Mines Corp. (TSX:BIM) are joining forces with a $1.50-a-share bid that values the company at about $590 million. Baffinland shares were up three cents at $1.55.

The energy sector was ahead 0.62% as the February crude oil contract on the New York Mercantile Exchange reversed early losses to gain 14 cents to US$91.54 a barrel. Imperial Oil (TSX:IMO) rose 91 cents to C$42.65 while Talisman Energy (TSX:TLM) rose 30 cents to 22.88.

The information technology sector was also supportive as Research In Motion Ltd. (TSX:RIM) ran up 89 cents to $64.18.

New York markets were higher amid a strong report from tech bellwether Intel Corp. and mixed economic data.

New York’s Dow Jones industrial average gained 55.48 points to 11,787.38, the Nasdaq composite index rose 20.01 points to 2,755.3 and the S&P 500 index edged up 9.48 points to 1,293.24.

The U.S. Commerce Department reported that retail sales rose 0.6% last month. Still, the showing was less than the 0.8% gain that economists had been expecting.

Meanwhile, a widely-watched gauge of U.S. consumer sentiment also fell during January. The University of Michigan’s index fell to 72.7 from 75.2.

But other data showed that U.S. businesses added to their inventories for an 11th consecutive month in November as sales posted another strong increase. Inventories rose just 0.2% in November, the smallest advance since a similar gain last May. The U.S. Commerce Department also reported that sales rose 1.2% in November after an even bigger 1.5% October increase.

North American markets racked up gains for the week with the S&P/TSX main index up 192 points or 1.44% while the Dow industrials rose 113 points or 0.96%.

In corporate news, Intel Corp.’s fourth-quarter net income jumped 48% to US$3.39 billion or 59 cents a share, beating expectations of 53 cents a share. However, the results were based mainly on strong demand from corporations. The rise of smaller and sleeker gadgets such as the iPad have hurt consumers’ appetite for new PCs. Intel’s shares dipped 21 cents to US$21.08.