TORONTO - The Toronto stock market closed slightly higher Thursday, thanks in large part to strong earnings from three of the big Canadian banks.

It was another volatile day on the S&P/TSX composite index, which lost as much as 104 points before rallying to close up 21.79 points to 10,933.96.

But the financial sector ran up a solid 2.27 per cent after Royal Bank (TSX:RY), National Bank (TSX:NA) and TD Bank (TSX:TD) all beat expectations.

"Key to the bank numbers is the fact that writeoffs aren't as bad," said Irwin Michael, manager at ABC Funds, adding the banks are a good indicator in reflecting how the economy is performing.

"If the economy is getting better, thanks to a lot of the money that was thrown out into the marketplace by the monetary authorities, that helps the banks and if it helps the banks it helps the economy which helps labour and everything else."

The energy sector led declines, down 1.17 per cent even as oil prices moved higher.

The October crude oil contract on the New York Mercantile Exchange rose $1.06 to US$72.49 a barrel following two days of losses that had carved about US$3 from the price of oil. Suncor Inc. (TSX:SU) lost 56 cents to $34.26.

The Canadian dollar moved higher following two days of sharp declines that followed a warning from the Bank of Canada that it is prepared to intervene to stop the sharp rise of the loonie that could derail the economic recovery. The loonie closed up 1.02 cents to 92.11 cents U.S.

Shares of Royal Bank (TSX:RY) were up $3.46 at $56.55 after reporting a third quarter profit of $1.6 billion or $1.05 per share for the quarter ended July 31, up from $1.3 billion or 92 cents per share a year ago.

National Bank of Canada (TSX:NA) shares were ahead $2.38 to $60.89 after it reported that profits increased six per cent to $303 million or $1.78 a share during the third quarter of 2009.

And TD Bank Financial Group (TSX:TD) shares were ahead $2.14 to $68.39 as the bank reported third-quarter net income of $912 million or $1.01 per share, down from year-earlier profits of $997 million or $1.21 per share. Adjusted earnings totalled $1.3 billion or $1.47 per share.

The TSX Venture Exchange fell 3.94 points to 1,182.15.

New York markets strengthened as gross domestic product data showed the U.S. economy might be stabilizing.

The Dow Jones industrial average rose 37.11 points to 9,580.63 as a U.S. Commerce Department report showed the U.S. economy shrank at a one per cent annualized rate in the second quarter. The updated figure was unchanged from a preliminary reading that economists had predicted would be revised lower to a 1.5 per cent decline.

"Although today's report continues to show an economy declining in the second quarter, the pace of decline has eased sharply and the composition was more favourable, with a greater drawdown in inventories being offset by less weakness in consumer spending," said Paul Ferley, RBC assistant chief economist.

"Thus, the report will likely not alter the emerging view that the economy returned to positive growth in the third quarter since rising demand will increasingly need to be met with new production."

The Nasdaq composite index was 3.3 points higher at 2,027.73 while the S&P 500 index was up 2.86 points to 1,030.98.

Investors are worried about extending the market's spring and summer rally, in which stocks have risen more than 45 per cent off of multi-year lows since early March.

Analysts say the market has been running out of reasons to move higher and is now looking for more convincing signs of recovery in the economy before resuming its upward march.

In other corporate news, Boeing said Thursday its long-delayed 787 aircraft will be ready for its first flight by year-end and its first delivery in the fourth quarter next year. The company also says it will book a third-quarter charge of $2.5 billion pretax, or $2.21 per share, related to the 787 program.

Boeing's eagerly anticipated 787 passenger jet has been delayed several times due to design issues and its shares were up $4 to US$51.82.

Other commodity prices were mixed as the December bullion contract on the New York Mercantile Exchange rose $1.50 to US$947.30 an ounce while September copper was down 0.85 of a cent at $2.8485 a pound.

The gold sector ticked 1.1 per cent higher while the base metals sector was down 1.42 per cent as Goldcorp Inc. (TSX:G) advanced 55 cents to $39.47 while Teck Resources (TSX:TCK.B) moved down 40 cents to $27.18.

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