Canada’s Energy stocks helped the Toronto stock market gain more than 200 points for a 2nd day in a row yesterday thereby, wiping out the major losses incurred on Monday on hopes that small signs of economic improvement will result in the start of a recovery by the end of the year. Toronto’s S&P/TSX composite index advanced 254.92 points to 10,355.85, following a 204-point run up on Wednesday.

The energy sector rose just over 4% as the August crude contract on the New York Mercantile Exchange moved up $1.56 to US$70.23 a barrel after the U.S. government said that the economy may be faring better than previously thought. Crude prices had fallen from an 8-month high near US$73 earlier this month on investor doubts that demand in a weak U.S. economy may not justify the stock and commodity rally since March. Investors also took in news that Alberta has announced a 1 year extension to two incentive programs designed to encourage natural gas drilling, which has fallen off because of low commodity prices. In March, the Alberta government announced a $200-per-metre royalty credit to companies on a sliding scale based on their 2008 production levels. It also introduced a well incentive program, which would offer a maximum 5% royalty rate for the 1st year of production from new oil and gas wells.

But buying sentiment picked up in the afternoon in large part because of gains in homebuilders, retailers and other consumer discretionary stocks.

In the United States stocks also rallied as investors were relieved Fed Chairman Ben Bernanke withstood a barrage of pointed questions from Congress on the Bank of America-Merrill Lynch deal relatively unscathed. Retailers and home builders led stocks higher for much of the day, helped by a surprising profit increase from retailer Bed Bath & Beyond and energy companies. Stocks extended gains shortly before midday as investors took Bernanke’s hearing in stride. Despite lawmakers’ criticisms of Bernanke, the Fed chairman is well liked on Wall Street and most analysts anticipate he will be reappointed (his 4 year term is up next year).

The Dow Jones industrial average gained 2.08% snapping a 4 day losing streak, the Standard & Poor’s 500 Index gained 2.14% and the Nasdaq Composite Index gained 2.08%. With the 2nd quarter ending early next week, some portfolio managers have already begun their end-of-quarter “window dressing” of selling some shares with big losses and buying some of the quarter’s best-performing stocks to help improve their returns. This Wall Street ritual also is likely to have helped ignite Thursday’s rally.

Regards,

Wilfred Vos Bcs, FMA, CIM, CFP, FCSI, DMS, CBV, MBA, CFA

SVP & Partner