Up Up and Away On Oil Surge

The close: Up and awayRTGAMNorth American stocks took off on Thursday afternoon, posting their strongest one-day gains in about two months, even as the source of the rally looked suspect.The S&P/TSX composite index closed at 14,982.91, up 292.45 points or 2 per cent.

The Dow Jones industrial average closed at 12,604.45, up 213.97 points or 1.7 per cent. And the broader S&P 500 closed at 1404.04, up 26.84 points or 2 per cent.The reason behind the rally at Canada's benchmark index is easy to pinpoint: Energy stocks surged in a big way after the price of crude oil rose to $127.79 (U.S.) a barrel in late afternoon trading, up $5.49. The European Central Bank said it might - might - raise interest rates at its next monetary policy meeting, which sent the U.S. dollar skidding.

The S&P/TSX energy index of 69 stocks rose 3.5 per cent, its biggest one-day rise in about two years. Canadian Natural Resources Ltd. rose 6.4 per cent, EnCana Corp. rose 3.6 per cent and Suncor Energy Inc. rose 3.5 per cent.Materials also rose sharply, led by Potash Corp. of Saskatchewan Inc.

The fertilizer producer rose to $222.34, up $9.84 or 4.6 per cent - a new record high, and part of a surge among the world's leading agriculture stocks as investors bet that countries will put renewed efforts into boosting food yields worldwide.However, the rally among major U.S. stock market indexes is harder to pinpoint. Initial jobless claims were better than expected, but observers were not putting much faith in them as an important indicator of what's to come, given the economy continues to look weak.As well, both Wal-Mart Stores Inc. and Costco Wholesale Corp. produced stellar sales in May for stores that were open for at least a year - but that merely showed that stretched U.S. consumers were flocking to discount chains, perhaps to spend their one-time cheques issued by the U.S. government.

With energy prices surging again, those cheques won't go very far.Nonetheless, the Dow - normally sensitive to big moves in the price of crude oil - enjoyed its biggest one-day rally since mid-April. To be sure, oil producers Exxon Mobil Corp. and Chevron Corp. were near the front of the pack, with gains of 4.2 per cent and 4.1 per cent, respectively.But 27 of the 30 stocks in the index rose - including beaten-up General Motors Corp., Home Depot Inc. and Citigroup Inc. - demonstrating that the rally was widespread. Similarly, 85 per cent of the stocks in the S&P 500 rose.Copyright 2001 The Globe and Mail