North American stock markets rallied Wednesday as U.S. Federal Reserve chairman Ben Bernanke appeared to indicate that he expected inflation to decline.

Bernanke told Congress on Wednesday that while high oil prices remain a concern, a slowing of the U.S. economy could provide the necessary ingredient to limit price increases.

Traders took that as a signal that the Fed many be finished hiking interest rates.

In Toronto, the S&P/TSX composite index shot up 147.89 points, or 1.29%, to 11,619.58.

All 10 TSX main sub-groups were up, with the materials sector lifting 2.50% and financials advancing 1.82%.

Gold for August delivery ended up $13.30 at US$642.80 an ounce after two straight negative sessions. Goldcorp Inc. rose $1.22, or 3.86%, to $32.80.

Swiss giant Xstrata raised its offer for miner Falconbridge Ltd. to $63.25 a share, up from $59. Falconbridge gained $1.34, or 2.16%, to $63.38.

TD Bank rose $1.00, or 1.76%, to $57.82.

The energy sector lifted 0.21%, despite a drop in the price of oil. Crude for August delivery ended down 88¢ at US$72.66 a barrel.

Canadian Natural Resources Ltd. gained 38¢, or 0.66%, to $57.59.

The Canadian dollar rose 0.13 of a cent to US88.12¢.

The junior S&P/TSX venture composite index rose 25.47 points, or 1.02%, to 2,534.57.

In New York, the Dow industrials surged 212.19 points, or 2%, to close at 11,011.42. The Nasdaq composite index gained 37.49 points, or 1.8% to finish at 2,080.71, while the S&P 500 Index rose 22.95 points, or 1.9%, to end at 1,259.81.

After markets closed, Intel Corp., the world’s biggest chip maker, reported its biggest profit drop in more than four years Wednesday and forecast weaker-than-expected sales in the current three months.