Source: The Canadian Press

The Toronto stock market closed sharply higher Friday with bank stocks leading the charge after selling off earlier in the week following mixed earnings reports.

The S&P/TSX composite index surged 226.54 points or almost 2% to 11,879.72 with commodities also higher following data showing that a slowdown in U.S. economic growth in the second quarter wasn’t as steep as expected.

The TSX Venture Exchange gained 19.93 points to 1,488.85.

“I think we’re basically having a relief rally because, for most of the last week, the markets have been pretty depressed,” said Colin Cieszynski, market strategist at CMC Markets Canada.

“And so today, we didn’t have any real negative surprises so it’s a Friday and we’re just getting a bit of a rebound, basically a trading bounce.”

In the first revision to the quarter’s gross domestic product, the U.S. Commerce Department said GDP grew at an annualized rate of 1.6%. That’s down sharply from the original reading of 2.4% growth — but better than the 1.4% that the markets had expected.

However, it doesn’t bode well for the rest of the year.

“Judging by what we’ve seen since the second quarter ended, the U.S. economy has continued to struggle during this period of unusual uncertainty,” observed BMO Capital Markets senior economist Jennifer Lee.

“Look for roughly 1% annualized growth in the third quarter, which would be the slowest growth rate since the recession ended — but growth nonetheless.”

The Canadian dollar was ahead 0.39 of a cent at 95.02 cents US.

The financials sector was the strongest advancer, up 3% following a mixed bag of quarterly earnings reports from four of the big banks this week. CIBC (TSX:CM) and National Bank (TSX:NA) handed in earnings that beat analyst forecasts while Bank of Montreal (TSX:BMO) and Royal Bank missed estimates.

But all banks were higher Friday after the financial sector was hit by a wave of selling earlier in the week as investors realize that despite a couple of misses, the banks are very strong players.

“They’re very strong and they’re very stable and at the end of the day that does get recognized,” said Cieszynski.

On Friday, Bank of Montreal rose $1.31 to $57.60 and Royal Bank (TSX:RY) gained $1.45 to $50.40.

TD Bank (TSX:TD) and Scotiabank (TSX:BNS) report earnings next week.

The base metals sector was up 2.97% as September copper on the New York Mercantile Exchange was ahead six cents at US$3.36 a pound. Teck Resources (TSX:TCK.B) was up $1.55 at C$35.11 and Equinox Minerals (TSX:EQN) climbed 24 cents to C$4.68.

Oil prices headed higher with the October crude contract on the New York Mercantile exchange rising $1.81 to US$75.17 a barrel, leaving the energy sector up 2.18%. Crude is up over the last three sessions but has tumbled from a high of US$82.55 earlier this month on demand concerns.

Canadian Natural Resources (TSX:CNQ) rose $1.56 to C$34.52 while Suncor Energy (TSX:SU) was up 55 cents at C$32.70.

The gold sector was also higher as the December bullion contract on the New York Mercantile Exchange rose 20 cents to US$1,237.90 an ounce. Kinross Gold Corp. (TSX:K) advanced 38 cents to C$17.36.

Comments from U.S. Federal Reserve chairman Ben Bernanke also helped send stocks higher. Bernanke, speaking at the central bank’s annual conference, reaffirmed his outlook for economic growth next year and said the Fed was ready to take extra steps to stimulate the economy if needed.

New York markets were also positive following the GDP report, with the Dow Jones industrial average up 164.84 points at 10,150.65.

The Nasdaq composite index rose 34.94 points to 2,153.63 despite a surprise announcement from chip giant Intel that third-quarter revenue will fall below its earlier forecast because of weak demand for computers.

Intel, the biggest provider of microprocessors for PCs and a bellwether for the broader technology industry, now expects revenue for the quarter of US$10.8 billion to US$11.2 billion. That compares with a previous forecast of $11.2 billion to $12 billion. Intel shares rose 19 cents to US$18.37.

The S&P 500 index climbed 17.37 points to 1,064.59.

The TSX gained 158 points, or 1.34%, this past week while the Dow industrials dipped 63 points or 0.06%.

In other corporate news, shares in Research In Motion Ltd. (TSX:RIM) fell $1.10 to $48.35 as efforts by the BlackBerry maker to broaden the debate over data encryption appear unlikely to break a logjam over Indian government demands for access to users’ emails by an Aug. 31 deadline. India has threatened to cut off BlackBerry services for about one million Indian users if RIM does not find a way for security agencies to monitor encrypted data.

Com Dev International (TSX:CDV) warned Thursday that the latest quarter will produce a loss instead of an expected profit and its 2010 annual revenue will be lower than last year’s, rather than modestly higher. However, its shares were 14 cents higher at $1.80.

The bidding war for data storage provider 3Par Inc. continued Friday as Hewlett-Packard boosted its offer for the company to US$1.88 billion, topping the latest bid from Dell Inc. Earlier in the day, 3Par said it had accepted the latest offer from Dell which amounted to US$1.8 billion. Dell shares were up 14 cents to US$11.89 while Hewlett Packard dipped 22 cents to US$38 and 3Par jumped 24.4% to US$32.40.