A TSX tote board is pictured in Toronto, on Dec. 31, 2012. Canada possesses a developed economy in every regard but that doesn’t mean investors can ignore emerging markets. The weighting of resource-related companies in the S&P/TSX composite remains much higher than their contribution to gross domestic product despite recent market weakness.Frank Gunn/The Canadian Press
North American stocks opened higher on Thursday, a day after posting their biggest one-day gain in four years, as data showed the U.S. economy grew faster in the second quarter than initially thought.
The S&P/TSX composite index rose 218.9 points, or 1.64 per cent, to 3,600.52 shortly after markets opened. Consumer staples was the only key group that was in the red, while energy stocks rallied 3 percent on the heels of higher crude prices.
The Canadian dollar added 0.21 of a U.S. cent to 75.42 cents (U.S.)
The Dow Jones industrial average soared 248.0 points, or 1.52 per cent, to 16,533.47, the S&P 500 gained 31.66 points, or 1.63 per cent, to 1,972.17 and the Nasdaq composite added 84.63 points, or 1.8 per cent, to 4,782.17.
U.S. second quarter GDP came out at 3.7 per cent, well above expectations of 3.2 per cent. Personal consumption was 3.1 per cent, in-line with forecasts.
The positive data confirms that the U.S. economy continues to slowly strengthen leaving the U.S. Federal Reserve in a dilemma. Clearly, the strengthening U.S. economy warrants a liftoff in interest rates. However, challenging international economic growth conditions are key considerations for the Fed. The need for balancing domestic and international conditions is keeping economists and investors guessing as to when the Fed will raise rates.
Other data showed jobless claims fell more than expected last week, pointing to a steadily firming labor market.
"Despite the good GDP numbers that we saw today, September largely seems off the table because of the turmoil that we've seen in the past week," said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.
However, he said recent data "certainly points to a possibility of a rate hike this year."
The market surged on Wednesday after New York Fed President William Dudley said the case for a September rate hike seemed "less compelling" than before.
The Fed, which meets on Sept. 16-17, has said it will raise rates only when it sees a sustained recovery in the economy.
Kansas City Federal Reserve President Esther George told CNBC on Thursday that while market volatility complicates the rate hike picture, the economy is strong enough to withstand a rate increase and that the normalization process should begin.
Investors will be keeping a sharp eye on an annual conference starting on Thursday of some of the world's top central bankers in Jackson Hole, Wyoming for further clues on the timing of a U.S. interest rate hike.
The market also got a rare dose of good news from China, where stocks snapped a brutal five-day losing streak.
Oil prices jumped more than 4 percent after the rally in stocks and an unexpected fall in U.S. crude inventories.
In Toronto, CIBC gained 4.12 per cent to $94.03 after reporting that its profits rose 6 per cent, announced a share buyback and boosted its dividend to mark the fourth consecutive quarterly hike.
TD Bank was up 44 cents to $52.24 as its quarterly earnings rose 8 per cent and beat forecasts.