Market averages are posting small gains on news that U.S. GDP soared to a 7.2% annual rate in the third quarter. This was well above expectations, and solidifies the view of most economists that the U.S recovery is solid.

As well, U.S. weekly jobless claims remained below the 400,000 mark.

Considering the huge upside surprise, markets have been rather restrained amid the ongoing flood of earnings releases. At midday, the S&P/TSX index is up 16 points to 7,746.

Volume is hefty at 151.5 million shares, with buying trumping the selling by a five to two margin. Market breadth is much narrower, as winners outnumber losers 11:10.

On a sector basis, earnings are driving the trade. Health care stocks are down 2.5%, and there is also weakness in trusts and golds.

However, consumer stocks are stronger, as are miners, techs, industrials and real estate.

Biovail is a real drag on the health care sector, dropping more than 13% ahead of its earnings announcement. It said that third quarter net income was $13 million for 2003, compared with net income of $75 million for third quarter 2002. It also projected annual product sales revenue growth of 10% next year, and earnings per share for 2004 are expected to be in the range of $2 and $2.20.

Telecom firm, Call-Net Enterprises is also getting whacked for weak earnings, down 6.7% on word that it lost $29.7 million in the third quarter.

Elsewhere, there is weakness in EnCana, Canadian Natural Resources, Alcan and CP Ships.

Golds are weaker on the improved U.S. economic outlook, a move that is hurting Bema Gold and Nevsun Resources.
The big weakness, however, is in Agnico Eagle, which is down about 21% following its weak earnings reported yesterday.

Bigger producers, such as Placer Dome, Wheaton River and Kinross, are higher at midday though.

Techs are stronger, led by another 2.8% gain in Nortel. BCE is up 1%, too, and there are gains in firms such as Wi-Lan, and Bakbone Software.

Other gainers include resources such as Agrium, Inco, Potash, Suncor, FNX Mining, Claude Resources and Northgate Exploration. ATS, ConjuChem and Quebecor World are all up too.

In earnings news, Thomson saw earnings increase to $306 million in the quarter, compared with $253 million in the third quarter of 2002.

Canadian Pacific Railway posted a 45% increase in net income to $95 million in the third quarter of 2003, compared with $65 million in the same period last year.

Bowater recorded a net loss of $56.7 million for the third quarter of 2003. These results compare with a net loss of $32.3 million in the third quarter of 2002. Before special items, the net loss for the third quarter of 2003 was $51.7 million.

Inex Pharmaceuticals lost $9.7 million in the third quarter of 2003.

Domtar had net earnings of $3 million and an operating profit of $36 million on net sales of $1.2 billion during the third quarter of 2003.

Rothmans said that its earnings for the quarter increased by 22% to $28.6 million, compared with $23.3 million for the same period last year.

Precision Drilling saw its third quarter earnings jump to $37.8 million.

Fortis said that its earnings were flat at $18.1 million, compared with $18 million for the same period last year.

Mega Bloks Inc enjoyed third quarter income of US$12.6 million.

Hub International Ltd. reported Q3 income of US$6.8 million.

Labopharm said, consistent with expectations, its net loss for the third quarter was $7.9 million, compared with $3.5 million for the quarter in 2002.

Finally, in M&A news, Brookfield Properties said that it intends to purchase a building in Washington, D.C. from the Union Labor Life Insurance Co. for $157.5 million. The transaction is expected to close in early December.

In New York, market gauges are posting modest gains, with the Dow Jones industrial average gaining just 22 points to 9,796. The tech heavy Nasdaq composite index is four points higher at 1,941. The broader S&P 500 is flat at 1,049.

The S&P/TSX Venture index is seven ticks stronger at 1,539. Volume remains robust in the small caps at 51.2 million shares. Odyssey Resources is leading the way, with a 9.5¢ gain to 35¢ on 1.5 million shares traded.