Stocks are making some modest gains on signs of improved economic growth. Invesor optimism has the S&P/TSX composite index up 19 points to 8,815.

In Canada, January building permits slipped 0.9% to $4.4 billion, although housing permits remain strong. As well, the Ivey Purchasing Managers Index came in at 59.6, up 0.4 points on a year-over-year basis.

In the U.S., economy watchers got a small positive sign with word that jobless claims fell by 7,000 to 345,000 last week. The four-week moving average also declined. Traders are keying on tomorrow’s jobs report for a real sign of employment growth though.

It was also reported that productivity numbers were revised downward, and that factory orders for January declined a bit more than expected. Overall though, the recovery story remains in place.

Toronto volume remains very weak though, with a scant 124.9 million shares trading so far today, with buying action edging the selling by a seven to five margin. Market breadth is also positive, as winners outnumber losers six to five.

The financial stocks are driving the gains today, up 0.6%. Golds, industrials, and telecoms are up modestly, too. Miners, energy and health care stocks are backing off recent gains, however.

Newfound optimism is boosting the banks today, led by beaten up Royal Bank. It has gained 1% today, after suffering several days of losses. CIBC has gained a similar amount, and Scotia continues to attract buyers. TD Bank and Bank of Montreal are recording smaller gains.

Nortel is down a little in modest trading, but there’s strength in the techs thanks to smaller names such as Tundra Semi and 724 Solutions, which are making strong gains.

Similarly, small names are driving the gold group higher. Eldorado Gold has gained 4.4% in active volume. High Point Resources is up 5%, and there’s also buying in Golden Star Resources.

Molson is up1.1%. Recent whipping boy, Sino-Forest, is up 6.7%. Bombardier is up 1.5%.

Biotechs are recovering, with solid gains in Forbes Medi-Tech and Inex Pharma, after Patheon jumped 13.6% on news that net earnings were $2.6 million, compared with $3.1 million a year ago. However, looking ahead, it confirmed previous guidance of 2004 revenue growth in the mid-teens, and suggested that the growing revenue momentum is expected to carry over into 2005.

The other big winner on the day is Impact Energy. It has jumped 12% on news that it is being taken over by Thunder Energy on the basis of 0.222 common share of Thunder for each common share of Impact. Thunder Energy is down on the news. GMP Securities Ltd. is acting as financial adviser to Thunder and FirstEnergy Capital Corp. is acting as financial adviser to Impact. A break fee of $5 million part of the deal too.

In other M&A news, South Atlantic Ventures Ltd. is buying a Swedish zinc mine from Rio Tinto plc for US$100 million.

On the downside, energy stocks are giving back recent gains, although the action is mixed internally. EnCana is down 1%, and there’s weakness in Talisman Energy, and Canadian Natural Resources. However, Penn West is up yet again, as is Suncor Energy.

The reversal is Sino-Forest is also being felt on yesterday’s winners. That means that Slocan, Abitibi and Norske Skog are all sliding today.

There is also weakness in recent winners such as Alcan, Fording, and International Uranium. Biovail is down another 2.8% on regulatory concerns. And, Forzani and Precision Drilling are both sliding too.

In earnings news, PetroKazakhstan has earned fourth-quarter 2003 net income of $90.3 million, compared with $45.1 million for the same period in 2002. For the year, net income was $317.5 million, compared with $162.6 million in 2002. Higher production, improvements in the company’s transportation costs and higher prices all contributed to the higher earnings.

Sobeys released quarterly net earnings of $44 million for its third quarter, compared with the $45.8 million in the third quarter last year.

MDS earned $28 million in its first quarter of fiscal 2004.

TLC Vision reported a net loss of $2.9 million in the fourth quarter of 2003, compared with a net loss of $39.7 million for the same period a year ago. The 2003 net loss was $9.4 million. In 2002, the company recorded a net loss of $144.7 million.

On the financing front, Vasogen has closed its previously announced offering of 8.5 million common shares. Needham & Co., Inc. and RBC Capital Markets are lead managers for the offering, with A.G. Edwards & Sons, Inc. acting as a co-manager.