North American stocks rallied Tuesday, as investors were cheered by an economic report that provided indication U.S. inflation might be in check.

The S&P/TSX composite index gained 126.99, or 1.07%, to 11,977.15.

All 10 TSX main sub-groups were up, with the energy index gaining 0.55% despite a modest drop in the price of oil. The September crude contract ended down 48¢ at $73.05 a barrel.

Canadian Natural Resources gained 55¢, or 0.92%, to $60.42.

The materials index gained 1.12%, while the gold sub-index was up 1.01%.

The December gold futures contract fell $6.40 to US$632.90 an ounce.

Teck Cominco raised its bid for Inco to $89 per share from $82.50, in response to a bid from Brazilian firm CVRD. Inco shares rose 95¢, or 1.07%, to $89.75, and Teck Cominco gained 81¢, or 1.03%, to $79.81.

The Canadian dollar moved 0.25 of a cent higher to US89.02¢.

The S&P/TSX Venture composite index edged down 9.52 points, or 0.37%, to 2,593.77.

In New York, markets jumped on the release of the producer price index report.

The Dow Jones industrial index gained 132.39 points, or 1.2% to 11,230.26. The Nasdaq composite index rose 45.97 points, or 2.2% to 2,115.01. The S&P 500 gained 17.37 points to 1,285.58.

The U.S. Labor Department said today that wholesale prices increased just 0.1% in July, while the core rate, which excludes food and energy, fell by 0.3%. On Wednesday, the consumer price index report is expected.