Resource stocks bounced back Tuesday morning to push Toronto markets into the black, although they were losing ground by midday. U.S. markets were down slightly on worries about inflation.

At midday, the Toronto Stock Exchange S&P/TSX composite index was ahead by 6.05 points or 0.06% at 9329.33. The TSX Venture Exchange was down 6.84 points or 0.43% to 1590.97.

New York’s Dow industrial average slid 12.34 points or 0.12% to 10239.95. The Nasdaq composite lost 7.22 points or 0.36% at 1987.21 while the S&P 500 index fell 2.20 points or 0.19% to 1163.49.

The Canadian dollar, which had traded lower early in the morning, got some life from an unexpected source. The dollar rallied following news of Conservative MP Belinda Stronach’s defection to the Liberals. The loonie, which had been trading 0.20¢ lower at US78.56¢ just prior to the 10:30 a.m. EDT announcement, immediately reversed course. By noon EDT, the dollar was trading at US78.85¢, up 0.09¢ on the day.

Traders bet that her addition to the federal cabinet would boost the chances that the federal budget would pass in a critical vote Thursday. If the minority Liberal government were to lose that vote, Canadians would face another election in June.

On the markets, the TSX energy group was up 0.72%, even though crude futures posted further losses. A barrel of light crude was quoted at US$48.45, down 16¢, on the New York Mercantile Exchange.

The TSX gold group also was up, by 1.2% as the bullion added $1.10 to US$420 in late London fixing. Financial and technology shares both were in the red.

In New York, the government’s report of higher-than-expected wholesale price increases renewed Wall Street’s inflation fears. The report overshadowed strong earnings from the retail sector.

Investors had hoped the Labor Department’s Producer Price Index for May would show stability, but the index rose 0.6%, more than the 0.4% economists expected. With volatile energy and food costs removed, so-called core PPI rose 0.3%, compared with the 0.2% expected on Wall Street.

While oil prices continued their trend lower Tuesday, the fact that core PPI rose more than expected led investors to the conclusion that the effect of higher raw materials and other pricing pressures were taking hold. The big fear is that those prices would be passed along to consumers, which would either choke off economic growth or spur inflation.

Overseas, Japan’s Nikkei stock average tumbled 1.11%. In afternoon trading, Britain’s FTSE 100 was up 0.29%, Germany’s DAX index fell 0.31%, and France’s CAC-40 lost 0.19%.