Stocks close higher amid signs of economic growth

The Canadian dollar closed up 0.67 of a cent to 101.45 cents US as Statistics Canada said gross domestic product increased by 0.2% in June, against the 0.1% rise that economists had expected.

The agency reported that GDP expanded at an annual rate of 1.8% in the April-June period, slightly better than the 1.7% pace recorded in the U.S.

U.S. indexes maintained a strong advance as Bernanke told an audience at the Fed’s annual retreat in Jackson Hole, Wyo., that the Fed will act to promote growth as needed.

The Dow Jones industrials moved up 90.13 points to 13,090.84. The Nasdaq composite index climbed 18.25 points to 3,066.96 and the S&P 500 index rose 7.1 points to 1,406.58.

Traders had been encouraged for much of August that signs of a slowing global economy in mid-summer indicated that central banks would step in with more stimulus to keep the recovery on track.

Hopes had risen in particular after the release last week of minutes from the last Fed interest rate meeting Aug. 1 which said a growing number of members wanted to see the central bank do more to help the U.S. economy. And there had been speculation Bernanke would use Friday’s much-anticipated speech to signal more assistance, possibly in the form of further quantitative easing. This involves the Fed printing more money to buy bonds.

But economic data released since then, including better than expected job creation in July, rising retail sales and a recovering housing sector, actually point to a strengthening economy, meaning the Fed could find it hard to justify more easing, analysts say.

“I think this is what Fed governors are saying, the conditions are just not in place for massive further stimulus,” said John Tsagarelis, senior portfolio manager at Manulife Asset Management.

Bernanke suggested Friday that the Fed will consider further steps to boost the economy, which he describes as “far from satisfactory.”

The Fed has its next interest rate announcement Sept. 14 and prior to that is the release next Friday of the U.S. non-farm payrolls for August. Job creation data for July beat expectations.

Traders also looked ahead to the European Central Bank’s interest rate announcement on Thursday. There are expectations that the ECB will announce it is moving to help the most vulnerable members of the eurozone by controlling borrowing costs that ran ahead to unsustainable levels in Spain and Italy earlier this summer but have since retreated somewhat.

ECB president Mario Draghi had sought to reassure markets at the beginning of this month, saying the ECB was prepared to do everything possible within its mandate to protect the euro currency union.

The TSX energy sector rose 0.8% as oil prices moved higher with the October crude contract on the New York Mercantile Exchange ahead $1.85 at US$96.47 a barrel. Cenovus Energy (TSX:CVE) rose 32 cents to $32.30 and Talisman Energy (TSX:TLM) climbed 24 cents to $13.70.

Athabasca Oil Corp. (TSX:ATH) shares gained $1.07 to $13.58 as the company confirmed that it is in the early stages of forming a joint venture for two of its Alberta oilsands properties. It didn’t name a potential partner. But the Globe and Mail earlier reported that Kuwait’s state-owned petroleum company is looking to invest as much as $4 billion in an oilsands partnership.

The base metals sector was ahead 1.9% as copper gained one cent to US$3.46 a pound. First Quantum Minerals (TSX:FM) advanced to 70 cents $18.99 and HudBay Minerals (TSX:HBM) gained 30 cents to $8.43.

The gold sector charged ahead more than 3% while December bullion rose US$30.50 to US$1,687.60 an ounce. Goldcorp Inc. (TSX:G) advanced $1.31 to $40.47 and Barrick Gold Corp. (TSX:ABX) was ahead $1.20 to $38.01.

Financials were little changed following the last batch of quarterly earnings reports from Canadian banks.

National Bank of Canada (TSX:NA) reported after the close Thursday that quarterly profits grew by 13% to $379 million. Adjusting for one-time items, it earned $353 million, or $1.98 per diluted share, up from $334 million and beating analyst estimates by eight cents. Its shares slid $1.11 at $74.01.

And on Friday, Laurentian Bank of Canada (TSX:LB) said it earned net income of $30 million, or $1.06 diluted per share, in the quarter ended July 31. That was up from $29.1 million, or $1.08 diluted per share, in the same year-earlier period. Adjusted diluted earnings were $1.27 per share, up from $1.08. Its shares climbed 94 cents to $47.45.

Telecoms were the biggest decliner with BCE Inc. (TSX:BCE) down 63 cents to $43.82.

New York hedge fund Mason Capital Management has fired back at Telus by calling its own meeting for voting shareholders – this one to set a minimum premium to support consolidating the telecom company’s shares. Telus (TSX:T) and Mason are in a battle over converting the telecom company’s dual share structure of voting and non-voting shares into one class of common shares. Mason owns just under 20% of Telus’ voting shares. Telus shares fell $1.58 to $62.07.

The TSX ended the week down 133 points or 1.1%.