Stock markets rebound 1 day after big drop, oil rallies higher

North American stock markets and oil prices moved solidly higher Thursday, putting at least a temporary stop to the steady losses that have plagued those markets lately.

The benchmark stock index in Toronto, theS&P/TSX composite index, ended the daywith a gain of166points, or 1.4 per cent, at 12,336, led by a 3.9per cent rise in energy stocks.

• Stock markets tumble as loonie falls to 13-year low
• Canadian dollar will drop to 59 cents, Macquarie forecasts
• Sinking oil prices: winners and losers

Even with Thursday's triple-digit gain, the Toronto index has fallen by 5.6 per cent since the start of the year.

In New York, the market staged an equally impressiverebound. The Dow Jones industrial average surged 228points, or 1.4 per cent, to 16,433, led by gains inExxonMobil and Chevron shares. The broader S&P 500 index jumped 1.7 per cent to 1,922. it was thebest one-day gain for both indexes since Dec. 4.

Major U.S. indexes fell to 3-month lows on Wednesday.

"It's been pretty ugly so far, year-to-date, and it's good to see the gains, but we'll see if they follow through tomorrow," said Sean Lynch, co-head of global equity for Wells Fargo Investment Institute.

Theloonieclosed at 69.63 cents US, down 0.08 cents from Wednesday's close.Earlier in the day, it had traded as low as 69.46 cents US.

The dollar movedlower despite a rebound for oil, which gained 72centsa barrel to settle at $31.20US in New York trading. Oil hasbeen testing 12-year lows this week. Benchmark Brent crude also rose.

Rate cut bandwagon growing

Fourteenof 27economistsBloomberg surveyedare now predicting that the Bank of Canada will cut its key lending rate by another quarter of a percentage point to 0.25 per cent at itsJan. 20meeting.

Economists at CIBC and BMOon Thursday became the latest to join the rate-cut camp.

"The commodity sector's pain is spreading to thedomestically-focused, non-resource parts of the economy, trumpingthe gains in non-commodity exports to the U.S.," BMOsaid in a morning research note.

Bloomberg says trading in overnight money marketsshows investors are putting the odds of a rate cut at about 50 per cent. The odds were16 per cent a month ago.