TORONTO - The Toronto stock market closed higher Tuesday as bargain hunters moved in following a string of losses, but trading turned cautious amid more data that suggest a slowing U.S. economy.

The S&P/TSX composite index came down from a 177-point surge to close up 107.67 points at 11,200.17. The TSX Venture Exchange slipped 8.7 points to 1,347.52.

A weaker U.S. dollar helped push the Canadian dollar up 0.82 of a cent to 94.72 cents US.

Economic reports have routinely fallen short of economist forecasts in recent months. That has investors worried that the growth is not coming as quickly as expected and any expansion will be slow and over a prolonged period.

Investors took in another such report Tuesday from an industry trade group that said the U.S. service sector grew more slowly in June, yet another sign growth could weaken in the second half of 2010.

The Institute for Supply Management, a trade group of purchasing executives, said its index which tracks service-oriented companies dipped to 53.8 last month from 55.4 in May. That reading still shows expansion, but at a slower rate than the 55 reading that had been expected.

"The general feeling among respondents is that business conditions are positive. However, the report highlighted that continuing weakness on the jobs front is raising concerns about the strength of the economic recovery," said RBC economist David Onyett-Jeffries.

Economic worries had pushed the TSX down just under 100 points Monday to its lowest level since early November 2009. The main index is down almost 1,100 points or almost nine per cent from late April, its highest level for the year.

The TSX lost four per cent last week alone, but analyst say the selling has been overdone.

"There's a lot of worry about how much the global economy is slowing ... but I think it's slowing down, it's not returning to recession," said Kate Warne, Canadian markets specialist at Edward Jones in St. Louis.

"(But) everyone seems to be quite willing to throw in the towel and say, it's gone from faster than we expected to, now back to recession. I think there is actually an opportunity for long-term investors to buy really quality companies at attractive prices," she said.

On Tuesday, the TSX financial sector led advancers, up 2.22 per cent as Royal Bank (TSX:RY) gained $1.22 to $52.37 while Scotiabank (TSX:BNS) rose $1.27 to $49.12.

The energy sector was up 1.52 per cent even as the August crude contract on the New York Mercantile Exchange gave up early gains, declining 16 cents to US$71.98 a barrel after earlier going as high as US$73.86. Suncor Energy (TSX:SU) gained 48 cents to C$31.23 and Canadian Natural Resources (TSX:CNQ) improved by 80 cents to C$34.81.

Oil prices have fallen for the last seven sessions, with some analysts slashing oil price projections despite strong crude demand from emerging economies. Barclays cut its forecast for the average oil price in the fourth quarter to US$87 a barrel from the previous estimate of US$92 and lowered its prediction for 2011 to US$92 from US$97.

Copper prices also pared early gains, losing about half of early gains. The base metals sector rose 3.69 per cent as the September contract on the Nymex was ahead five cents to US$2.97 a pound. On the TSX, Teck Resources (TSX:TCK.B) rose $1.41 to C$31.68 and Quadra FNX (TSX:QUX) Mining ran up 49 cents to C$9.54.

Gold stocks fell amid declining bullion prices. The September gold contract in New York lost $12.60 to US$1,195.10 an ounce. Barrick Gold Corp. (TSX:ABX) dipped 51 cents to C$45.44 while Goldcorp Inc. (TSX:G) faded 75 cents to C$42.85.

Meanwhile, Statistics Canada reported Tuesday that the value of building permits fell in May. The agency said that both residential and non-residential sectors fell as municipalities issued $6 billion worth of building permits in May, a 10.8 per cent decline from April. The drop follows two consecutive monthly increases.

Gains on New York markets also faded away as investors returned to work following the Independence Day holiday and tried to recover some of the big losses that have piled up in recent weeks.

The Dow Jones industrial average, up 172 points in the morning, ended the session up 57.14 points at 9,743.62.

The Nasdaq composite index added 2.09 points to 2,093.88 while the S&P 500 index was ahead 5.48 points at 1,028.06.

In corporate news, BP shares were up $2.56 or 8.7 per cent to US$31.91 in New York after the company said it has no plans to issue new shares to help pay for the Gulf of Mexico oil spill. The company's statement is good news for investors whose own holdings would be diluted by a larger stock base.

The Jean Coutu Group (PJC) Inc (TSX:PJC.A) more than quadrupled its first-quarter profit, as the Quebec-based pharmacy chain increased revenue and continued to shake off the effects of its investment in Rite-Aid. Net income came in at $43.2 million or 18 cents a share with $642.9 million in revenue for the quarter ended May 29, 2010.

The earnings per share matched analyst estimates compiled by Thomson Reuters but revenue fell short of expectations. The consensus estimate on revenue was $667.9 million and its shares rose 21 cents to $8.39.

Cliffs Natural Resources Inc. (NYSE:CLF) says it now has a 52.1 per cent majority stake in Spider Resources (TSXV:SPQ) after purchasing about 316 million common shares as part of a friendly takeover attempt. Cliffs also says it plans to extend the offer until July 16 at 11:59 p.m. ET to allow more shares to be tendered to the offer. Spider shares were unchanged at 18.5 cents on heavy volume of 15.4 million shares.

Chinook Energy (TSX:CKE) was the most active stock, up 15 cents at $2.50 on very heavy volume of 37.6 million shares as the company made its debut on the Toronto Stock Exchange. Chinook is a combination of Iteration Energy and Storm Ventures International Inc., and has an inventory of drilling opportunities in Western Canada and Tunisia.