By James Langton

(August 2 – 13:00 ET) – Stocks are trudging higher this morning on generally dovish feelings about U.S. interest rates. The U.S. saw an unexpected drop in new-home sales last month, spurring hope that the Fed will leave rates alone. This feeling was bolstered by St. Louis Fed Bank President William Poole who said the economy is enjoying “low and stable inflation”, giving the Fed room to allow growth.

The TSE 300 is up 56 points at midday to 10,408. Volume is strong at more than 62 million shares, more than 2:1 in favour of buyers. Advancers are edging decliners.

Energy stocks are leading the way for a change today, with producers, integrateds and service stocks all bouncing after it was revealed that inventories are down. Industrials and software stocks are strong, too. The downside is limited. Only real estate, chemicals and autos are sliding.

Both BCE and Nortel are up about 0.9% in heavy trading. Nortel is back in the news with word that it has signed a seven-year, US$3 billion deal with Computer Sciences Corp. The deal will see Nortel transfer 2,000 employees to Computer Sciences by October 1 to look after its computer services needs. Nortel continues to shed secondary businesses to focus on optical and data networking.

Other stocks moving this morning include Talisman Energy, Northstar, Renaissance, Gulf, and Dreco in the energy business. Tech movers include Sierra Wireless, Celestica, Wi-Lan and Creo. CSA management and Thomson are also strong.

Battery Technologies continues to lead trading on the TSE, with no apparent news. Today it is down 7.5% on 3.5 million shares. It has been joined by Heritage Concepts as a heavy trading penny stock with no news to back it up. Heritage is at least surrounded by rumours of a deal with Cisco Systems fueling chatroom gossip.

The downside is coming from firms hit by profit-takers, such as Alcatel, Ballard Power, QLT and Rogers.

In other news, 360networks has a deal to sell more than US$100 million of telecommunications capacity on its South American network to France Telecom and Intelig Telecommunications Ltda. of Brazil.

Saputo Group Inc. is reporting net earnings of 52¢ a share, compared with 43¢ a share a year ago.

In the U.S. economic optimism is driving stocks higher at midday. The Dow is up 67 points to 10,674. The Nasdaq composite has gained 56 points to 3,741. The S&P 500 is up 10 points to 1,448. Oils are leading the way there too, with Exxon Mobil Corp. and Royal Dutch rallying. Microsoft and IBM are up, too.

On the CDNX stocks are up to 3,317, a 21 point rise. Volume is average at 14 million shares. Techs are strongest, followed by oils and mines. Winfield Resources Ltd is the top trader, up 76% to 44¢ on 2.65 million shares.