Stocks are making modest gains today on renewed economic optimism. Housing starts held up better than expected in September, bolstering the outlook for Canada’s economy. As well, the surging loonie is reportedly attracting foreign capital.

As a result, the S&P/TSX index is 14 points higher at midday to 7,575. Volume remains rather modest though, at 119.3 million shares.

The buying volume is swamping the selling by almost three to one. And, market breadth is positive too, with winners trumping losers by a margin of about 11:9.

With economic optimism driving the trade there’s strength in old economy sectors such as golds, diversifieds and materials. Financials are also stronger.

However, biotechs continue to get crushed, pushing the health care sector down more than 3%. There is much more modest weakness in consumer stocks and utilities.

Biovail is getting thumped today, down 12% in heavy trading after a Banc of America Securities analyst unsheathed the rarely seen “sell” rating when initiating coverage on the stock.

This is spilling over to Angiotech, which is down 2.7% following Biovail. This is despite news that the company has received approval from Health Canada to market a new premixed configuration of CoSeal.

It’s not all bad news in the sector, though. There are solid gains in TLC, Labopharm and Lorus Therapeutics.

The crop of losers otherwise includes a mix of names including CAE, PetroKazakhstan, CCL Industries, Yamana Gold, Sentra Resources, Power and SFK Pulp Fund.

Breakwater Resources is down 2% on news that it has completed a $30 million financing. The offering was completed through a syndicate of investment dealers led by Griffiths McBurney & Partners and including Dundee Securities Corp., McFarlane Gordon Inc., National Bank Financial Inc. and Paradigm Capital Inc.

Elsewhere, old economy stocks look strong, led by a 2% gain in Inco. There is also strength in Placer Dome, Alcan, EnCana, the Ivanhoes (Mines and Energy), Canico Resources, Southwestern Resources and First Calgary.

Techs are stronger too, led by a 0.7% gain in Nortel. It is joined by buying in Sierra Wireless, ATI, Rogers and Wi-Lan.

Financials are also making gains, with Manulife up 0.3%, and solid gains coming in TD Bank and Royal Bank.

In M&A news, Agrium’s subsidiary, Nu-West Industries, is buying some assets from Astaris Production LLC. The deal does not contemplate a cash payment by Agrium.

Pivotal is selling out to Oak Investment Partners for US$1.78 in cash per share. Pivotal’s business will be combined with Talisma Corporation, and Oak Investment Partners will be the controlling shareholder of the combined business.

Quebecor Media’s wholly owned subsidiary, Videotron Ltee, has successfully completed the refinancing of its credit facilities. The net proceeds resulting from the refinancing are being used principally to repay in full Videotron’s borrowings under its former bank credit facilities.

In New York, the trading action has been rather thin and markets have suffered modest declines. The Dow Jones industrial average is down 20 points at midday to 9,635. The Nasdaq composite index has lost 11 ticks to 1,897. The S&P 500 is down four points to 1,035.

The S&P/TSX Venture index is following the TSX’s lead, gaining two ticks to 1,395. Volume looks better there at 39 million shares. Magicorp Entertainment is leading the trade, gaining 1.5¢ to 7.5¢ on 2.6 million shares.