Source: The Canadian Press

The Toronto stock market closed sharply higher Wednesday, led by stronger resource stocks as commodity prices advanced on a weaker U.S. dollar and expectations that the U.S. Federal Reserve will further boost the American economy.

The S&P/TSX composite index rose 97.67 points to 12,673.31, while the TSX Venture Exchange climbed 25.4 points to 1,828.74.

The Canadian dollar moved close to parity with the U.S. dollar, closing up 0.57 of a cent at 99.52 cents US after going as high as 99.89 cents.

The loonie has been rising steadily despite signs the Bank of Canada could be ready to take a pause in sending interest rates higher. The loonie has been supported both by weakness in the American dollar and by higher commodity prices.

The Canadian dollar last reached parity with the greenback at the end of April.

Investors were encouraged by Tuesday’s release of the minutes to the last rate-setting meeting of the U.S. Federal Reserve three weeks ago which showed that the Fed thinks U.S. growth will be lower than previously predicted and that deflation is becoming an increasing concern.

Analysts said after the minutes came out that it’s no longer a question of if the Fed will make a move, but rather how much money it will pump into the U.S. economy by purchasing government bonds – known as quantitative easing – and taking other measures to encourage lending.

“So quantitative easing is basically running the (monetary) printing presses at maximum speed, which increases the quantity of money and that lowers the value of each U.S. dollar that’s out there and that’s why we’re seeing it go down,” said Colin Cieszynski, market analyst at CMC Markets Canada.

Markets have run up sharply since the beginning of September on expectations the Fed will take further measures to support the economy, possibly setting up investors for a big disappointment when the Fed makes its next announcement on interest rates early in November.

“With the size of the rally you’ve had, the expectations would be for a pretty aggressive QE program and it’s getting to the point where even if they bring something in, it still might be a disappointment if it’s a US$200-billion program instead of a US$1-trillion program,” observed Cieszynski.

“That’s the risk the markets are starting to get themselves into.”

The energy sector rose 0.89% with the November crude contract on the New York Mercantile Exchange ahead $1.34 at US$83.01 a barrel. Husky Energy (TSX:HSE) gained 51 cents to $25.60 and Cenovus Energy (TSX:CVE) rose 43 cents to C$30.30.

The base metals group led TSX advancers, up 2.78% as the December copper contract on the Nymex rose three cents to US$3.82 a pound after hitting a 27-month high of US$3.84. Teck Resources (TSX:TCK.B) climbed $1.29 to $45.99 while Quadra FNX Mining (TSX:QUX) was up 61 cents at $15.91.

Gold stocks were also higher as the December bullion contract in New York gained $23.80 to a record close of US$1,370,50 an ounce. Goldcorp Inc. (TSX:G) improved by $1 to $45.45 while Barrick Gold Corp. (TSX:ABX) was ahead 44 cents at $49.41.

Investors were also encouraged by data showing China’s September trade surplus stayed high at US$16.9 billion even as export and import growth both weakened, hurt by slower global demand and a moderation in the rapid expansion of China’s economy.

Canadian railway stocks were higher after U.S. rail operator CSX topped earnings forecasts. Canadian National Railways (TSX:CNR) gained $1.67 to $67.35 and Canadian Pacific Railway (TSX:CP) climbed $1.93 to $66.15.

New York markets moved higher as investors took in better than expected earnings from the U.S. tech and financial sectors.

Intel, the world’s biggest maker of microprocessors, said after the markets closed Tuesday that its net income for the third quarter leaped 59% while sales rose 18% in an encouraging sign for the computer industry’s all-important holiday season. Intel’s fourth-quarter forecast suggests that demand is expected to stay solid.

And on Wednesday, JPMorgan Chase & Co. said that its third-quarter profit jumped 23% to US$4.42 billion as the banking giant had to set aside less money to cover loan losses. The bank earned US$1.01 per share, well ahead of the 90 cents per share that analysts polled by Thomson Reuters had been expecting.

But share prices in both companies fell, with Intel down 54 cents at US$19.23 and JPMorgan Chase off 56 cents at US$39.84.

“I thought that with earnings season starting up that people actually might go back to focusing on stocks and how companies are doing, but right now it just seems to be this whole liquidity trade driving markets,” Cieszynski said.

New York’s Dow Jones industrial average was 75.68 points higher at 11,096.08.

The Nasdaq composite index climbed 23.31 points to 2,441.23 while the S&P 500 index rose 8.33 points to 1,178.1.

In other corporate news, Potash Corp. of Saskatchewan (TSX:POT) has established a commitment that includes remaining in Canpotex, the potash export cartel which sets production levels to control pricing. It would also keep its corporate headquarters in the province, with key senior officers and executives living within the company’s home province. The announcement comes as PotashCorp tries to fend off a US$38.6-billion offer from international resource giant BHP Billiton. Its shares fell 31 cents to $148.70.

Grande Cache Coal Corp. (TSX:GCE) shares fell 68 cents to $6.55 after the company lowered its full-year 2011 sales volume guidance to 1.7 million to 1.9 million tonnes, down from earlier guidance of between two million and 2.2 million tonnes. The Calgary-based company faces production delays at its west-central Alberta mine and capacity constraints at its port.