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TSX rises amid weak U.S. consumer spending data, mixed earnings news

The fading name on the building in Toronto that used to house the Toronto Stock Exchange is pictured on August 18 2011. THE CANADIAN PRESS/Aaron Vincent Elkaim

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The fading name on the building in Toronto that used to house the Toronto Stock Exchange is pictured on August 18 2011. THE CANADIAN PRESS/Aaron Vincent Elkaim

TORONTO - The Toronto stock market closed with a solid advance Thursday even as a disappointing read on American consumer spending raised concerns about economic growth.

The S&P/TSX composite index climbed 56.09 points to 15,030.74.

The Canadian dollar rose 0.25 of a cent to 93.52 cents US.

U.S. indexes were in the red with the Dow Jones industrials down 21.38 points to 16,846.13, the Nasdaq 0.71 of a point lower at 4,379.05 and the S&P 500 off 2.31 points at 1,957.22.

The U.S. Commerce Department says consumer spending rose 0.2 per cent last month after no gain in April, missing expectations for a 0.4 per cent rise.

"More importantly, in real terms, consumption fell for the second straight month, down 0.1 per cent in May," said BMO Capital Markets senior economist Jennifer Lee, who also observed that consumers still account for the "lion's share" of the U.S. economy.

"Going forward, the second quarter will still see rebound but something in the order of around a three per cent annualized pace, down from our call of 3.8 per cent. This is very disappointing," Lee said.

U.S. incomes rose a solid 0.4 per cent in May, which met expectations, after a 0.3 per cent April gain.

Meanwhile, on Wednesday, the final revision to American economic growth in the first quarter showed that U.S. gross domestic product shrank 2.9 per cent, larger than the two per cent contraction economists had expected. However, the decline was due in large part to severe winter weather.

Analysts also point out that markets are close to record highs and susceptible to negative news.

Phil Orlando, chief equity strategist at Federated Investors in New York, said the stock market has been rising a little too fast recently, so a slight drop in the summer months wouldn’t come as a surprise.

"I fully expect to see a hiccup here, but I wouldn’t get too worried about it," he said.

On the corporate front, grocer Sobeys plans to close about 50 of its underperforming stores, most of them in Western Canada where parent company Empire Inc. (TSX:EMP.A) purchased the Canada Safeway supermarket chain.

Empire made the announcement as it also posted fourth-quarter adjusted net earnings from continuing operations of $131.3 million, or $1.42 per diluted share, beating estimates of $1.29. That compared with $95.7 million, or $1.40 per diluted share, in the same quarter of last year. Sales were $5.94 billion, up $1.68 billion year over year, narrowly missing expectations of $5.95 billion. It also upped its dividend 3.8 per cent to 27 cents a share but its shares gained 59 cents to $67.69.

Also, media giant Shaw Communications (TSX:SJR.B) reported quarterly earnings per share of 47 cents, two cents less than estimates. Revenue in the quarter was $1.34 billion, up one per cent year over year and its shares were unchanged at $26.35.

The TSX finished the day close to session highs as financials gained ground, up 0.43 per cent, and energy and golds erased early losses.

The energy sector was ahead 0.73 per cent as oil prices declined while fears diminished somewhat over supply disruptions from Iraq, with the August contract down 66 cents US to $105.84 a barrel.

The gold sector advanced about 0.38 per cent even as August bullion faded $5.60 to US$1,317 an ounce.

September copper was up a cent at US$3.17 a pound and the base metals component edged up 0.07 per cent.

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