Stock markets post solid gains amid strong employment data in Canada, U.S.

TORONTO - The Toronto stock market racked up a solid gain Friday at the end of a positive week amid strong jobs data and relief that the U.S. economy avoided a combination of government spending cuts and tax increases that came to be known as the "fiscal cliff."

The S&P/TSX composite index advanced 70.37 points higher to 12,540.81 as Statistics Canada reported the economy created 40,000 jobs last month. Economists thought that only about 5,000 positions would be turned out in December after job creation surged by 59,000 in November.

Canada's unemployment rate edged down to a four-year low of 7.1 per cent from 7.2 per cent in November and 7.4 per cent in October.

The Canadian dollar came back from early declines to move up 0.1 of a cent to 101.31 cents US.

The TSX Venture Exchange was ahead 2.05 points to 1,228.22.

New York indexes ran ahead as the U.S. economy cranked out 155,000 positions. That was in line with heightened expectations after payroll firm ADP reported Thursday that the U.S. private sector cranked out 215,000 jobs last month.

The Dow Jones industrials rose 43.85 points to 13,435.21, the Nasdaq inched up 1.09 points to 3,101.66 while the S&P 500 index closed at a five-year high, up 7.1 points to 1,466.47.

Indexes ended the first week of 2013 trading with solid gains after U.S. lawmakers reached an 11th hour deal to avert big tax hikes and spending cuts that were due to kick in at the start of the year.

The TSX gained 1.82 per cent this past week while the Dow Jones industrials ran ahead 3.84 per cent.

Traders also looked ahead to the start of the fourth-quarter earnings season in the U.S. next week with resource giant Alcoa Inc. reporting after the close on Tuesday.

The information technology sector led TSX advancers, up 1.38 per cent with Research In Motion Ltd. (TSX:RIM) ahead 50 cents to $11.85.

The energy sector also helped support the TSX, up 1.07 per cent as the February crude contract on the Nymex came well off session lows, closing up 17 cents to US$93.09 a barrel. Canadian Natural Resources (TSX:CNQ) improved by 61 cents to C$30.15 while Imperial Oil (TSX:IMO) was up 62 cents to $43.05.

March copper fell two cents to US$3.69 a pound and the metals and mining sector was up 0.74 per cent. Thompson Creek Metals (TSX:TCM) jumped 20 cents to $4.27 and Taseko Mines (TSX:TKO) climbed 12 cents to $3.19.

Financials were also positive as Sun Life Financial (TSX:SLF) gained 13 cents to $27.14 while Royal Bank (TSX:RY) advanced 37 cents to $61.07.

The gold sector finished up about 0.25 per cent after spending most of the session in the red amid speculation over just how long the U.S. Federal Reserve will continue with its economic stimulus program that involves the purchase of bonds to keep interest rates ultra low.

The minutes of the latest Fed policy meeting released on Thursday showed a split over how long to continue the purchases amid concerns that the continued bond purchases, known as quantitative easing, would destabilize the economy.

The Federal Reserve's quantitative easing program has involved printing more dollars to buy up bonds. The program has been supportive of gold prices since bullion looked attractive as an inflation hedge.

"Basically, the Fed came out and tested the waters with the concept of perhaps the economy is improving at a sufficient enough pace that we can start to remove some of the stimulus," said Phillip Petursson, director of institutional equities at Manulife Asset Management.

"And with gold being the beneficiary of QE, basically you’re printing money and driving inflation higher and therefore gold should move higher — you take that away and all of a sudden there’s a much less reason to want to own gold."

The February bullion contract on the New York Mercantile Exchange came off the worst levels of the morning after the U.S. jobs report but was still down $25.70 at US$1,648.90 an ounce.

Gabriel Resources (TSX:GBU) rose five cents to C$2.37.

In corporate news, Lululemon Athletica Inc. shares fell 4.55 per cent to $70.88 after Credit Suisse downgraded the stock to neutral from outperform citing a likely slowdown in comparative sales momentum and the risk of further merchandise margin pressure.

Enbridge Inc. (TSX:ENB) says it will spend $400 million to expand the capacity of its pipeline system between Hardisty, Alta., and the U.S. border. Enbridge says the project involves increasing pumping horsepower and that no new line pipe construction is involved. It expects to increase capacity by 230,000 barrels a day when the upgrade comes on line in 2015. Enbridge shares gained 14 cents to $43.16.