TORONTO -- Investors were in a buying mood on the stock market today, clawing back nearly half the market's massive losses on the previous day before.
A sense of calm returned to the Toronto market, which has swung violently all week between huge losses followed by moderate bouncebacks.
Traders looked for bargains today after what some called an irrational selloff Thursday that wiped more than $100 billion worth of stock value from Canada's benchmark index.
The TSX was up more than points early in the afternoon, while the U.S. House of Representatives prepared another vote on a bailout package for the American financial industry.
The Dow Jones average gained about 290 points as traders, as the bill was being debated in the lower house of Congress.
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The House's rejection of the US$700-billion bailout on Monday had sparked the biggest declines ever for the Dow and S&P/TSX benchmarks, in terms of points.
"People I think are bargain hunting a little on these depressed prices and hoping that the market is going to rally following a favourable vote in the House," said Scott Fullman, director of derivatives investment strategy for WJB Capital Group in New York.
On Wall Street, investors were also cheered by a Wells Fargo bid to takeover Wachovia, merger proposal that was done without U.S. regulatory involvement and despite an earlier Citigroup rescue.
. That suggests the financial crisis hasn't spread to all the big U.S. banks, although credit markets and bank lending remain tight.
Before stock trading began, the U.S. Labor Department reported that the U.S. economy shed 159,000 jobs in September, more than the 100,000 economists predicted. The U.S. unemployment rate remained flat at 6.1 per cent. That was welcomed by the markets, which feared that widespread job losses could further curb consumer spending, which accounts for more than two-thirds of the economy.
Traders on both sides of the border also bought up oil, fertilizer and metals stocks that had been beaten down in Thursday's market carnage,
Chyanne Fyckes, chief investment manager with Stone Asset Management in Toronto, called the TSX rally a "dead cat bounce" -- a short-lived uptick that follows a major drop.
"There's lots of cash on the sidelines, everyone knows that," said Fyckes. "You're going to get these rallies in here, but I still think you're going to see further downside."
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On Monday, the Canadian market had its biggest point drop ever after the U.S. House rejected an early version of the bailout plan for insolvent Wall Street banks. The next day the market recovered sharply and bounced around before Thursday's selloff triggered by recession worries and commodity price drops.
The recent economic turmoil has reinforced worries that Canada's resources-based economy will suffer from a worldwide drop in demand for oil, metals, fertilizer and grains. Worries also persist that the global financial crisis is squeezing the availability of credit in Canada.
In a move to loosen up Canadian credit markets, the Bank of Canada said today it is pumping another $12 billion or more into money markets to ensure Canadians have access to loans.
The central bank move expands total credit to $20 billion available to the markets by Nov. 6.
The economy has become the main issue in the campaign for the Oct. 14 Canadian federal election, with all the opposition parties attacking the federal Conservatives for what they say is a do-nothing approach to slowing economic growth.
Prime Minister Stephen Harper and Finance Minister Jim Flaherty continue to insist the economy is fundamentally sound and the financial crisis and housing slump that have battered the U.S. and spilled over into Europe isn't nearly so severe in Canada.
"The Canadian economy has continued to create jobs -- it's slower than it was, but it continues to grow," Harper said during campaign event Friday in Saint John, N.B.
"In Canada, we had a fairly stable mortgage sector and obviously our banks are in a stable situation."
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In London, Ont., Flaherty said the "tragic" consequences of Americans losing their homes in the U.S. housing market meltdown won't befall Canadian homeowners.
Speaking to students at the University of Western Ontario, the finance minister said Canadians can afford the mortgages they have and he added that the domestic housing market is stable.
Despite criticism at the televised English-language election debate Thursday night that the Conservatives aren't doing enough to avert a financial crisis at home, Flaherty said there's no need for sudden changes and that stability and steadiness will take Canada through the financial crisis.
Both Harper and Flaherty have said that while growth is slowing, the government's corporate and personal tax cuts announced last fall have helped companies and consumers deal with economic uncertainty.
In trading today, the Canadian dollar fell marginally to $92.56, its lowest level in more than two years. Meanwhile, oil prices rose 67 cents to US$94.53 a barrel on commodities markets.
The worsening U.S. economy has also spilled over into Europe, where France has called an exceptional weekend summit to come up with a common European response to the spreading U.S. financial crisis.
Today, Jean-Claude Trichet, head of the European Central Bank, called for European unity in responding to the global financial crisis.
Trichet warned that European "growth is weak and there are risks of it being even more so."
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He said this "exceptional period" of financial turbulence requires Europe to be "as united as possible."
