Markets are rallying heavily Wednesday as the U.S. military continues its advance toward Baghdad. The American-led coalition claims to have destroyed a division of the Iraqi Republican Guard and captured a key dam.

At midday the S&P/TSX composite index is up 66 points to 6401.

Volume is heavy at 120.5 million shares, with the selling action overwhelming the buying by a 12:11 margin. Market breadth is positive however, as winners outnumber losers five to four.

The typical war trade is unwinding today, as the U.S. military makes progress without suffering major losses. That means most everything is up, except gold.

Gold stocks are down 2.4% as the flight to safety loses steam. Energy stocks are down a bit, too, as oil prices slide.

The gains are coming in volatile favourites such as techs and telecoms, up 4% and 2% respectively. Consumer discretionary stocks are rallying impressively, as are health care names, industrials and diversifieds. Financials are strong, too.

There is loads of volume in bank stocks today, mostly to the buy side. However, CIBC is down 2% on heavy volume of almost 2 million shares.

Against this, there is strong buying in TD Bank, Scotia, Bank of Montreal, Royal Bank and even National Bank. Manulife is the strongest name, though, the insurer is up 2.5% in active trading.

Nortel is leading the tech area higher, gaining 6.6% in decent volume of 11.1 million shares. BCE is up 2%. Research in Motion is even stronger, gaining almost 9%.

There is also notable buying in AT&T Canada, Lorus Therapeutics, Ipsco, Royal Group Tech and Aber Diamond.

Oil and gold are down. That has names such as Bow Valley Energy, Peyto Explorations, Ketch Resources and Baytex Energy selling off. One of the few exceptions is Gauntlet Energy, which is stronger today.

Kinross is leading the gold group lower with a 3% slide. Glamis, Iamgold and Goldcorp are all sharply lower, too.

Airline stocks are active following the news of Air Canada’s bankruptcy. The failed monopolist has dropped 52% in heavy trading of 20.2 million shares. Its class A shares are hurting even more, down 63% on 7.7 million shares. The happy beneficiary is upstart WestJet, which is up 6% on the day.

In M&A news, Saskatchewan Wheat Pool says that it has entered an agreement to sell its AgPro grain facility and certain agri-products assets to Parrish and Heimbecker for an undisclosed price. It notes that the transaction is expected to result in a small after-tax loss.

In other business news, the Fording Coal Partnership says that it will proceed with closure of Cardinal River Coal’s Luscar mine. It is expected that mining operations will be completed by April 2004. The current employee level of about 290 will be reduced in a phased process as mining is completed. Initial reductions to occur in May 2003, will affect about 190 employees.

Eldorado Gold reports that its total proven and probable reserve estimates have increased by 1.7 million ounces gold to 5.8 million ounces gold, predominantly through the completion of the feasibility study for the Kisladag project, Turkey, and accompanying additions at the Sao Bento mine, Brazil.

In New York, war optimism has been driving stocks higher all day. The Dow Jones industrial average is up 227 points to 8,297. The S&P 500 has gained 23 points to 882. The Nasdaq composite index is up 48 points to 1,396.

Again, the small caps are going their own way. The S&P/TSX Venture index is down six points to 1,046. Volume remains weak at 13.4 million shares. Pan Asia Mining is the day’s top trader, flat at 12¢ on 1.5 million shares.