TORONTO - The Toronto stock market managed a toehold on positive ground mid-afternoon Tuesday as commodity stocks climbed despite doubts about the economic recovery.

The S&P/TSX composite index rose 12.5 points to 10,561.6 after drifting to a 20-point decline on Monday.

The energy sector was up 1.2 per cent as the July crude contract on the New York Mercantile Exchange rose $1.69 to US$69.78. Suncor Inc. (TSX:SU) advanced 55 cents to $38.31.

The rally has sent the TSX up over 35 per cent since March 9 but the weakening on markets this week is suggestive of a market split on the outlook for later this year.

"You have a lot of people that are on the sidelines that are not believers in this rebound/recovery story, you have lot of people who don't think the economic recovery will take shape any time in late 2009 or early 2010," said Paul Vaillancourt, director of asset allocation at Franklin Templeton Managed Solutions.

"And then you have others that think absolutely this is the beginning of a new bull market because the indexes worldwide have rallied 30, 40 per cent from the lows. So you have this dichotomy."

For his part, Vaillancourt believes the markets are "appropriately priced" at current levels, which are still well off the highs of just above the 15,000-mark about a year ago.

U.S. dollar weakness made for another volatile day for the Canadian currency, which was up 1.01 cents to 90.55 cents US.

The TSX Venture Exchange climbed 4.78 points to 1,136.6.

New York markets were also largely caught in the malaise for a second day as the U.S. Treasury Department gave approval for 10 of the nation's largest banks to repay US$68 billion in government bailout money.

The money came from the $700-billion emergency rescue fund created by Congress at the height of the financial crisis in October.

The Dow Jones industrial average moved up 21.6 points to 8,786.1.

The Nasdaq was up 21.71 points to 1,864.11, supported by positive news from chip maker Texas Instruments Inc., which raised expectations for its second-quarter profit and revenue, signalling that demand may be improving for the battered semiconductor industry.

Texas Instruments now expects a profit in a range of 14 cents to 22 cents per share for the current quarter, much higher than the 10 cents that analysts were expecting and its shares ran ahead $1.32 to $21.09.

The S&P 500 was ahead 4.95 points at 944.1.

The banks, which weren't named, have been eager to get out of the program to escape government restrictions such as caps on executive compensation.

Experts have said such repayments show some stability has returned to the banking sector, which was thrown into chaos last fall with the collapse of Lehman Brothers.

Also focusing investor attention this week is speculation that the U.S. Federal Reserve could begin raising interest rates sooner than thought has grown because U.S. Treasuries continue to weaken, forcing yields higher.

The yield is a widely used benchmark for home mortgages and other loans.

The U.S. 10-year Treasury was down a basis points from late Monday -- its highest level this year -- to 3.88 per cent, partly over the uncertainty caused by Monday's move by the U.S. Supreme Court to order a stay on the deal to sell Chrysler to Italian automaker Fiat. However, investors found some reassurance from Fiat's statement that it is committed to buying a controlling stake in the distressed U.S. automaker.

Elsewhere on the Toronto market, the base metals sector was ahead almost two per cent as the July copper contract in New York advanced 10 cents to US$2.36 a pound. Teck Resources Ltd. (TSX:TCK.B) rose 33 cents to $19.89.

Thompson Creek Metals Company Inc. (TSX:TCM) increased its production guidance on Monday in response to recent improvements in the molybdenum market. Its shares moved up 72 cents to $11.54.

Inmet Mining Corp. (TSX:IMN) shares fell $3.67 to C$44.87 after it said Monday that it has signed a deal to raise $300 million by issuing 6.75 million common shares in a bought deal

The August bullion contract in New York was up $2.20 to US$954.70 and the gold sector was the biggest decliner, down two per cent. Barrick Gold Corp. (TSX:ABX) faded 97 cents to C$39.89.

In other corporate news, Heritage Oil Ltd. (TSX:HOC) announced an all-stock reverse-takeover agreement with Genel Enerji A.S., an oil company with interests in Iraq. The deal will see Heritage issue 260 million ordinary shares in exchange for the entire share capital of Genel. Based on Monday's closing price of Heritage shares on the TSX, the deal is valued at about $3.02 billion. Its shares rose 47 cents to $12.09.

Air Canada (TSX:AC.B) shares were ahead four cents to $1.45 after the carrier reached a tentative deal with three of its unions on pension funding which calls for a 21-month moratorium on pension funding, with management agreeing to let employees become part-owners of the airline.

Canada's largest cheesemaker, Saputo Inc. (TSX:SAP) reported slightly lower net profits for the latest year and fourth quarter, but the company saw a sharp jump in revenues, mainly from the acquisition of the Neilson Dairy business in southern Ontario. Its shares rose 46 cents to $22.16.