If the markets were a movie, Tuesday would be a summer blockbuster for U.S. markets but a disaster flick for Bay Street. U.S. stocks had their biggest day in almost two months, while Canadian markets were dragged down by the Nortel monster.

At close, the S&P/TSX recovered from midday lows to finish down 20.18 points or 0.24% to 8294.37, while the TSX Venture Exchange was off 4.8 points or 0.33% to 1467.59.

On Wall Street, the Dow Jones industrial average surged 123.22 points or 1.24% to close at 10085.14. The tech-laden Nasdaq finished up 30.08 points or 1.64% to 1869.1, while the S&P 500 composite gained 10.76 points or 0.99% to 1094.83.

The Canadian dollar fell 0.03 of a cent to US75.03¢

In Toronto, most of the action was around Nortel Networks Corp. It began early in the day when CEO Bill Owens said the company is falling short of cost targets. The stock dropped 85¢ or 15.7% to $4.55 on volume of more than 37.5 million shares; that accounted for slightly less than 15% of the total volume on the TSX.

Nortel pulled down the TSX technology sub-index, which fell 1.45%, making it the runaway loser on the day. Meanwhile, financials were off 0.36% and consumer stocks were also down as a whole. Gold and energy shares finished ahead — up 0.3% and 0.46%, respectively — but not enough to bring back the TSX.

Among financial stocks, Industrial Alliance Insurance and Financial Services Inc. said its second quarter profit jumped 15% as premium income increased 27%. Its shares gained 50¢ to $46.25.

On Wall Street, the Dow’s performance was the best one-day gain since June 7 when it advanced 149 points. Still, strategists were pleased with the gains but reluctant to call a market turnaround after recent multi-month lows.

Contributing to gains were a couple of encouraging economic reports as the Conference Board said consumer confidence surged to a two-year high in July and the Commerce Department said that, although down, U.S. new home sales, came in at a seasonally adjusted annual rate of 1.33 million — above the 1.27 million expected by economists.

Analysts also suggested investors may have jumped back into the market to take advantage of low share values after a tough month.

Verizon Communications was the blue-chip gauge’s big winner after reporting second-quarter earnings of 64 cents a share on revenue of $17.8 billion, both topping the average analyst estimates compiled by Thomson First Call.