Toronto stocks are making solid gains this Friday, after a disappointing jobs report made an interest rate cut this fall seem more likely. At midday, the S&P/TSX composite index is 40 points higher at 7,220.

Statistics Canada reported that13,000 jobs were lost in July, and the jobless rate ticked higher.

The rise in unemployment has fanned speculation that interest rates will drop. Traders appear to be taking stocks higher on the possibility of higher rates.

Toronto volume is on the light side at 100 million shares, with the buying holding a 22:9 edge on selling action. Market breadth also favours the bulls, as winners outnumber losers 18:13.

Most sectors are up, led by a 2.4% gain in golds. But there is also solid buying of the financials, energy stocks, health care and materials. Techs and diversified names are weaker though.

Placer Dome is leading the golds higher, up 1.1% in heavy trading. There is even more juice in the smaller names, such as Bema Gold, Glamis and Cambior, after their strong year to date performance was highlighted on CNBC.

The banks are all rallying higher at midday, led by a 1.4% gain in Scotia. There are similar gains in CIBC and Royal Bank, TD Bank is lagging, up just 0.5%. On the downside, Kingsway Financial has dropped 6.6% after releasing its latest earnings.

EnCana is powering the energy group higher, up 1.5% in strong volume. There are also gains in Gabriel Resources, Gammon Lake Resources, Cumberland Resources and First Calgary Petroleums. Cequel Energy is up 7% on news that it earned $10.8 million in the second quarter.

Other gainers include VSM MedTech and Husky Injection Moldings.

Despite the broad rally, techs remain under pressure, a trend that appears to be blowing over from the U.S. where traders continue to lock in profits in the sector. Research in Motion is down 2%. And, there is notable weakness in Sierra Wireless, CGI Group, Geac Computer and BCE is down 0.4% too.

Inco and Tesco are also weaker.

In earnings news, SNC-Lavalin Group reported consolidated net income for the second quarter increased to $23.2 million, compared with $20.4 million for the same quarter last year.

Breakwater Resources has posted unaudited consolidated net earnings of $10.8 million, compared with $2.3 million for the same period in 2002. The 2003 quarterly results include a gain of $10.3 million on the sale of an exploration property in Quebec.

Stuart Energy Systems said its net loss for the first quarter was $7.3 million, compared with $6.5 million for the same quarter of fiscal 2003.

In New York, stocks are mixed all day, with the broader market up and techs down. The Dow Jones industrial average is 47 points higher at midday to 9,173. The tech-heavy Nasdaq composite index is down five ticks to 1,647. The S&P 500 has gained two points to 976.

The S&P/TSX Venture index is four points higher at 1,223. Volume remains robust at 21.7 million shares. Arawak Energy is leading the trade, flat with 957,400 shares changing hands.