TSX advances amid positive American economic data, rising oil

The Canadian dollar was up 0.29 of a cent to a 3 1/2-month high of 101.11 cents US.

New York markets were mixed as traders looked to U.S. data showing weak pricing pressure and a solid reading on industrial production.

The Dow Jones industrials was 7.36 points lower at 13,164.78, and the Nasdaq composite index was up 13.95 points at 3,030.93 ahead of earnings released after the close by tech bellwether Cisco Systems.

It reported quarterly earnings per share of 47 cents a share, two cents better than what analysts expected. Revenue came in at US$11.7 billion, exceeding estimates of US$11.6 billion. Its shares were up two per cent in after hours trading in New York as Cisco also raised its dividend 75% to 14 cents a share.

The S&P 500 index rose 1.6 points to 1,405.53.

Inflation remains tame as the U.S. consumer price index was unchanged in July for the third time in four months. Economists had expected the CPI to rise 0.2%.

And U.S. industrial production climbed 0.6% in July on top of a 0.4% gain in June and better than the 0.5% reading that economists had forecast.

The financials sector was the biggest advancer, up 0.6% as Royal Bank (TSX:RY) moved ahead 74 cents to $52.72.

Oil prices shook off early declines after a weekly U.S. government report showed a drop in inventories for last week. The September contract on the New York Mercantile Exchange gained 90 cents to US$94.33 a barrel after the Energy Information Administration reported a decline of 3.7 million barrels in crude inventories, much higher than the 1.5-million-barrel drop that analysts expected.

The energy component was up 0.3% and Cenovus Energy (TSX:CVE) climbed 30 cents to C$32.61.

The gold sector was ahead about 0.25% as bullion prices headed higher with the December contract ahead $4.20 to US$1,606.60 an ounce. Goldcorp Inc. (TSX:G) faded 24 cents to $36.24.

The base metals sector eased 0.2% on top of a three per cent loss Tuesday as the September copper contract on the Nymex was down a cent at US$3.35 a pound. Metal prices have weakened in the wake of data released over the past few days that showed slowing Chinese export growth and a sharp drop in economic growth in Japan in the second quarter.

Thompson Creek Metals (TSX:TCM) dropped nine cents to $2.26 while HudBay Minerals (TSX:HBM) shed 19 cents to $8.33.

Markets have rallied sharply since the beginning of June when the worsening European debt crisis started to squeeze Spain and Italy and raised worries about the viability of the global economic recovery.

But the TSX has risen about five per cent from those lows, in part because of hopes pinned on central banks to keep the rebound on track and take steps to ensure the survival of the European monetary union.

At the same time, a round of upbeat U.S. economic figures — including the industrial production data and a strong July retail sales report Tuesday — have reined in expectations of the Federal Reserve doing something in September. However, investors may not get a clearer insight into Fed policy until chairman Ben Bernanke’s speech on Aug. 31 at an annual economic conference in Jackson Hole, Wyoming.

“The market in June had priced in a lot of bad news and the news hasn’t been as bad as was priced then (and) that’s part of the reason why you have seen the rally, plus the hope that there’s going to be some sort of stimulus,” said Chris Kuflik, wealth adviser at ScotiaMcLeod in Montreal.

“But the U.S. may not need that stimulus. If they didn’t, the initial read by the market would be disappointment. However, when cooler heads prevail, that disappointment turns into the realization that maybe things are not that bad.”

Traders are also looking to the European Central Bank and the monetary authorities to announce new policy measures in the coming weeks. While the ECB is expected to restart its bond-buying program in order to keep a lid on the borrowing rates of Italy and Spain, the People’s Bank of China is widely tipped to cut interest rates further to shore up faltering economic growth.

In corporate developments, Sears Canada Inc. (TSX: SCC) reported a quarterly net loss of $9.8 million or 10 cents per share, compared with a net loss of $200,000 or less than a penny per share in the similar 2011 period. Revenue fell to $1.05 billion from $1.15 billion. Its shares were unchanged at $10.35.

Agriculture equipment maker Deere said its third-quarter net income rose 11% to $788 million, or $1.98 per share but fell well short of expectations of $2.31 a share as the company was hit hard by a weakening global economy and prolonged drought in the U.S.

Deere’s revenue rose 15% to $9.59 billion, missing expectations of $9.61 billion, and its shares dropped $5.03 to US$75.10.

Shares in Connacher Oil and Gas Ltd. (TSX:CLL) fell 4.5 cents or 10.34% to 39 cents after the oil company announced a second-quarter loss of $45 million, widening from a loss of $44.2 million a year earlier. It also said it had reached a deal to sell its refinery in Great Falls, Mont., to Calumet Specialty Products Partners, L.P. for US$120 million, plus $35 million to $50 million in working capital.