By James Langton

(May 11 – 17:30 ET) – Stock traders jumped for joy when they saw lower than expected U.S. retail sales numbers this morning. The numbers seemed to indicate an easing of inflationary pressure. However a closer look at the data forced traders to pull in their horns toward the end of the day. Traders will be watching tomorrow’s U.S. Producer Price Index to get another reading on today’s data.

Bond traders didn’t really bite on the surprising numbers, and they are still pricing in an 80% chance of a 50 basis point rate hike next week. It is expected that the Bank of Canada will follow suit. The Bank released its semi-annual monetary policy report earlier today. It seemed to confirm the feeling that the Bank is set to hike.

The rate fears restrained any rally. The TSE 300 composite index finished the day up 47.5 points to 9144. Volume was average at 146.5 million shares, albeit about 5:2 in favour of buyers. Advances outpaced declines 6:5.

On a sector basis seven of the TSE’s 14 subgroups finished in the black, led by merchandisers and oil service stocks. Engineering firms and software companies held their gains, although early buying in tech hardware sold off toward the end of the day.

Nortel Networks gave up most of its early gains to finish slightly up on massive volume of 12.6 million shares. But the big tech gains were on the more speculative side, driven by firms such as JDS Uniphase, 724 Solutions, Ballard Power and CGI Group.

Canadian Natural Resources had a huge day, closing up 6.6% on 1.3 million shares. It was joined by energy firms such as Northstar Energy and Berkley Petroleum. Sherritt also closed up impressively.

The weak groups on the TSE were led by old economy stocks. Conglomerates, publishers, golds and paper stocks all slid on the day. DaimlerChrysler, Canadian Pacific and Laidlaw all took beatings today. Financials finished lower too led by the banks such as Royal Bank and Toronto-Dominion Bank. However Sun Life gained almost 4% after announcing a share buyback. Trimark Financial closed up just 10¢ in heavy trading.

In New York stocks were up across the board. The Dow Jones industrial average added 178 points to 10546. The S&P gained 25 points to 1407. NASDAQ rose 115 points to 3499, thanks to a snap back in recent whipping boys Cisco Systems and Intel. After the bell Dell beat the Street reporting 19¢ a share ahead of expectations of 16¢ for its latest quarter.

In other business news the Financial Times is reporting that Xerox Corp. CEO Richard Thoman will be ousted today, a move that is neither confirmed nor denied by the company.

The small caps managed to claw their way into the black by the end of the day after a poor morning. The CDNX finished up 17 points to 3383. Volume was moderate at 38.9 million shares. Energy stocks led the way, joined by small gains in miners and techs. Pan Ocean Explorations led the way, up 25% to 15¢ on 2.3 million shares.