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TSX up amid slew of retail earnings; traders look to Fed minutes, bank earnings

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TORONTO - The Toronto stock market closed higher Wednesday as traders felt reassured about the intentions of the U.S. Federal Reserve on rate hikes and looked to a run of positive earnings reports from the big Canadian banks.

The S&P/TSX composite index ran ahead 124.67 points to 14,649.86. The Canadian dollar was down 0.13 of a cent at 91.62 cents US.

New York was also higher as minutes of the Federal Reserve’s late April meeting showed that officials discussed how to eventually tighten monetary policy and move rates away from near zero, where they've been since the financial crisis of 2008.

The minutes disclosed that a number of Fed officials said it would be important for the central bank to "communicate still more clearly about the Fed’s policy intentions as the time of the first increase in the federal funds rate moves closer."

The Dow Jones industrials jumped 158.75 points to 16,533.06, the Nasdaq climbed 34.65 points to 4,131.54 and the S&P 500 index rose 15.2 points to 1,888.03.

Traders also digested mixed news from the retail sector as Sears Canada (TSX:SCC) posted a quarterly net loss of $75.2 million, or 74 cents per share, up from a net loss of $31.2 million, or 31 cents per share, a year ago. Revenue came in at $771.7 million compared with $867.1 million a year ago, impacted by cold weather and store closures. It shares drifted 10 cents lower to $15.21.

And Target reported that adjusted earnings came in at 70 cents a share, a penny lower than expectations. Revenue of US$17.01 billion was in line with expectations and Target also lowered its outlook and its shares were ahead 59 cents to US$57.20. The results were released a day after the company replaced the president of its struggling Canadian operations.

Stock markets have been rattled in recent days by retail earnings and outlook disappointments. But analysts say it's important to remember that the sector has had an extremely challenging quarter and that the trend of recent economic data is positive.

"We have gone through a very harsh winter and we have gone through a spring that has not exactly been all that great and so that has had a pretty significant effect on a broad number of companies across the economy," said Colum McKinley, portfolio manager and vice-president, Canadian Equities, CIBC Asset Management.

"But we really need to look through the short-term dynamics of the effect of the weather and I think it would be too early to read this and interpret the results that we’ve seen as a broader economic slowdown."

Financials were a major gainer, up one per cent a day before the big Canadian banks start to release quarterly earnings results. Analysts are expecting another solid if unspectacular quarter.

"I think this is going to be a bit of a Goldilocks quarter for the banks, not too hot, not too cold," added McKinley.

On the commodity markets, the energy sector was ahead 1.47 per cent, while July crude in New York gained $1.74 to US$104.07 a barrel.

The base metals sector was up 0.71 per cent as July copper dipped two cents to US$3.12 a pound.

The gold sector was ahead almost 0.5 per cent as June bullion faded $6.50 to US$1,288.10 an ounce.

In other corporate developments, shares in Bombardier (TSX:BBD.B) fell four cents or 1.02 per cent on heavy volume of 17.4 million shares amid new uncertainty for its CSeries aircraft.

Its largest customer, Republic Airways, is weighing options for the plane, which no longer fits into its operating model. Republic says it is deciding how to best deploy the firm order for 40 CS300 aircraft and hasn't decided to cancel. Bombardier insists the order is "intact."

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