U.S. productivity, employment numbers boost markets

TORONTO — Despite a rough ride for the country's top life insurers on Thursday, Canadian stocks gained for the third straight day as U.S. productivity continues to improve and fortify corporate earnings south of the border.

The S&P/TSX composite index added 109.5 points or 0.99 per cent to 11,180.7, while the TSX venture exchange added 0.2 points or 0.02 per cent to 1,331.55.

The U.S. Labor Department announced Thursday that worker productivity surged at an annualized rate of 9.5 per cent in the third quarter, with unit labour costs falling at a 5.2 per cent rate.

"Productivity continues to surprise on the upside," said Stephane Marion, National Bank chief economist. "This heralds a hefty increase in profit margins."

In Toronto, gainers outpaced losers during Thursday's session by a ratio of almost three-to-one, as nine of 10 sub-indexes closed in positive territory.

The materials group was up 0.93 per cent, energy stocks advanced 0.53 per cent and financials gained 0.49 per cent even as shares in Manulife Financial Corp. and Sun Life Financial Inc. dropped after they reported unexpected third quarter losses. Great West Life Co. also fell after booking a third-quarter profit that was less than expected.

"Since Manulife cut its dividend in August and with (Thursday's) quarterly results, you are seeing some tremendous weakness in this sector," said Vincent Delisle, Scotia Capital strategist. "Lifecos just have not participated at all in this year's rally."

Research In Motion Ltd. added 26 cents to $61.65 after the maker of BlackBerry devices said it will buy back up to $1.2 billion worth of its outstanding shares over the next 12 months. Since late September, RIM shares have fallen more than 30 per cent on concerns about increased competition in the global smartphone market.

On commodity markets, gold was up $2 to $1,089.30 U.S. an ounce, while oil fell 78 cents to $79.62 U.S. a barrel. The Canadian dollar closed at 93.83 cents U.S., down 17 basis points.

In addition to impressive productivity gains, U.S. stocks were bolstered by lower-than-expected weekly jobless claims data and a positive earnings surprise from Cisco Systems Inc.

The Dow Jones industrial average gained 203.82 points, or 2.08 per cent to 10,005.96. The S&P 500 advanced 20.13 points or 1.92 per cent to 1,006.63 and the Nasdaq composite index closed at 2,105.32, up 49.80 points, or 2.42 per cent.

Marion said U.S. corporations continue to pocket the bulk of the productivity gains.

"In light of this development, we are comfortable with our current forecast calling for a 30 per cent increase in S&P 500 profits over the next year."

dpett@nationalpost.com