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TSX advances, traders look for reassurance on U.S. economic health

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TORONTO - The Toronto stock market closed higher Friday as investors pinned their hopes on economic data and second-quarter earnings coming out next week that could provide reassurance about the pace of the U.S. economic recovery.

The S&P/TSX composite index gained 63.51 points to 15,094.25. The Canadian dollar was up 0.28 of a cent to 93.8 cents US.

New York indexes moved into positive territory late in the session amid data showing improving consumer sentiment, with the Dow Jones industrials edging up 5.71 points to 16,851.84.

The Nasdaq was up 18.88 points at 4,397.93 and the S&P 500 index rose 3.74 points to 1,960.96 as the University of Michigan's widely watched consumer sentiment index rose to 82.5, an improvement on the 81.9 reading that economists had forecast and up from a flash estimate of 81.2.

But the report failed to dispel doubts about economic growth that were sparked this week by a report showing the U.S. economy contracted by 2.9 per cent in the first quarter, almost a full point higher than expected.

Markets had initially shrugged off the data on expectations the American economy would jump ahead in the second quarter as the deterioration was largely blamed on severe winter weather. But concerns resurfaced Thursday as a new report showed a worse than expected reading on consumer spending and consumption.

The report also sparked concerns about whether the American economy can take the strain of higher interest rates, particularly after St. Louis Federal Reserve president James Bullard said markets don’t realize how close the central bank is to reaching its targets of low unemployment and stable prices. That prompted speculation the Fed could hike as soon as the first quarter of 2015.

"I think it is a nervous market and it's a market where people are increasingly a little skeptical, a little worried and we are not away from geopolitical risk," said John Stephenson, president and CEO at Stephenson and Co. Capital Management.

"People are willing to put some bets on, but not big bets and they're not willing to whip it around so what you're seeing is a reluctance to commit more money towards strategies at this point in the cycle."

Traders are looking ahead to manufacturing and employment data next week for reassurance that the U.S. economy is indeed on track for a strong second quarter.

It is also hoped that the flood of corporate earnings reports covering the April-June period will provide reassurance that the economy is improving.

The consumer staples sector climbed 0.7 per cent as the parent of grocer Sobeys, Empire Co. (TSX:EMP.A) gained $3.13 or 4.6 per cent to $70.82. The stock had also edged higher Thursday after Empire said it was closing 50 underperforming Sobeys stores, while quarterly earnings beat expectations.

Commodity prices were mixed as September copper closed unchanged at US$3.17 a pound and the base metals group was up 0.88 per cent.

Techs strengthened and the sector also moved ahead 0.88 per cent.

Financials were also supportive, up 0.61 per cent.

The energy component was up 0.15 per cent as August crude declined 10 cents to US$105.59 a barrel. Crude prices have fallen this week in the wake of the weaker than expected U.S. consumer data and expectations that the sectarian fighting in Iraq won't spread to the oil-producing south.

The gold sector led decliners, down 0.18 per cent, even as August bullion rose $3 to US$1,320 an ounce.

The Toronto market ended last week with a slight loss, down 14 points as investors opted for caution amid doubts about the pace of growth in the American economy. The Dow industrials shed 95 points or 0.56 per cent.

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