Stocks are rebounding today, but the volume is weak, suggesting a lack of conviction behind the trade. A strong ISM report in the U.S. is generally boosting expectations for a US-led recovery. And that is, in turn, boosting stocks.

But, with a Fed meeting on tap tomorrow, many traders appear to be waiting to hear what it has to say about the timing of interest rate hikes.

The S&P/TSX composite index is up 56 points at midday to 8300. Volume is very weak though, with just 92.5 million shares traded. The weakness in this rally is also confirmed by the split of the volume, with selling action outpacing the buying by a 16:13 margin. This is skewed by big selling in Nortel, but market breadth is also negative, as losers outnumber winners 14:13.

The S&P/TSX Venture index is down at midday, dropping 10 ticks to 1653. Volume is very light there too at 25.1 million shares.

In New York, much the same trade is taking place. Traders are buying, but volume is very light ahead of the Fed. Still, the Dow is sitting on a 74-point gain at midday to 10300. Nasdaq is up 30 points too, sitting at 1950.

Nevertheless, many of the core sectors that have been hit by rate hike selling fears, are today rebounding strongly. Miners are almost 2% higher, energy, financials and real estate are all rallying impressively too. Utilities are weaker, down 1.7%, and trusts are also souring on the prospect of rate hikes.

Nortel remains a big topic for traders. It is down another 6.4% in heavy volume of 21.5 million shares, as traders try to puzzle out the fallout from from its latest troubles.

Apart from Nortel, there’s general recovery in many of the other techs that were caught in Nortel’s downdraft last week. ATI, JDS Uniphase, Open Text, Dalsa, Ballard Power, Sierra Wirless and Certicom are all jumping back today. Certicom is leading the way, climbing 16%, on news that Research in Motion is picking up its technology for use in its Blackberry pager system. RIM is up 2% itself too.

Apart from the tech rebound, it’s many of the old economy stocks that are rallying on the economic recovery story. Alcan is up another 2%, Inco has added 2.5%, and EnCana, Suncor Energy, Canadian Natural Resources, Teck, Brascan, Blackrock and Barrick are all jumping today too.

The financials are generally enjoying the prospect of recovery too, led by a 1.4% gain for CIBC. Bank f Montreal is up 1%, and there is strength in Royal Bank and Scotia too. However, Investors Group is down 2.4% on its latest earnings news.

There is also weakness within the strong sectors too. Compton Petroleum, Bema Gold and Wheaton River are all sliding within the old economy sectors. And, Cedara Software, Diagnocure, Q9 Networks, and CanWest Global are all weaker too.

In earnings news, Seamark Asset Management reported that it has posted first quarter earnings of 29¢ per share, up from 25¢ in the first quarter of 2003. And, Oncolytics Biotech Inc. said that it lost $2.7 million in the first quarter.

In M&A news, Talisman Energy has completed the acquisition of the Flotta Catchment-area interests of the Intrepid Energy group at a price of US$137.5 million.

Also, Forte Resources and Oiltec Resources have entered into an agreement that will see Forte acquire Oiltec for approximately $60.0 million, comprising $15.0 million of assumed net debt, and the balance by the issue of Forte common shares and cash.

And, Geocan Energy has closed its previously announced purchase of certain assets for $8.5 million.

In other business news, Hemosol has completed the reorganization transaction involving Hemosol, its securityholders and MDS. Under the arrangement, Hemosol has received a cash infusion of $16 million for a significant portion of its unused tax losses and other tax assets.
Also, Theratechnologies reported that it has received positive preliminary results of a phase I clinical study for its transdermal hormone therapy.