TORONTO - The Toronto stock market ran up sharply Thursday in a widespread advance as investors latched onto further signs of an improving American economy.

The S&P/TSX composite index rose 116.3 points to 10,714.11 as investors took in economic data showing U.S. retail sales beat expectations while fewer people applied for jobless benefits last week.

Gains were led by rising financials but substantial support also came from commodity stocks on hopes for higher demand from Asia and recovering global economies.

The financial sector ran up 1.1 per cent, with National Bank ahead 59 cents to $54.17.

Bank of Montreal (TSX:BMO) shares ticked nine cents higher to $45.32 after it said that it would raise $350 million in an offering of preferred shares. The bank had planned a $200-million offering, but increased the size of the deal due to investor demand.

The price of oil on the New York Mercantile Exchange rose $1.35 to US$72.68 a barrel, taking the energy sector almost two per cent higher. Canadian Natural Resources (TSX:CNQ) gained $1.50 to $66 and EnCana Corp. (TSX:ECA) improved 71 cents to $62.99.

"I still think that people are gaining confidence in the economy and towards the market," said Ian Nakamoto, director of research at MacDougall, MacDougall and MacTier, a Toronto-based money manager

"There is still a lot of cash out there and I still think the average fund manager is underweight equities and underweight cyclical equities. So I think the market will continue to do well."

The TSX Venture Exchange edged up 5.93 points to 1,148.32 while the Canadian dollar climbed four tenths of a U.S. cent to 90.65 cents US.

In New York, indexes closed well off the highs of the day but the Dow Jones industrial average still closed up 31.9 points to 8,770.92.

The Nasdaq composite index moved ahead 9.29 points to 1,862.37 while the S&P 500 index gained 5.74 points to 944.89.

The Commerce Department said Thursday that U.S. retail sales increased by 0.5 per cent last month, in line with economists expectations. It was the largest increase since sales surged by 1.7 per cent in January following six straight declines.

However, "three-tenths of the increase reflected a spurt in gasoline station receipts, mostly due to higher prices rather than greater driving," observed BMO Capital Markets senior economist Sal Guatieri.

"Gas prices have climbed about US$1 this year, which could cut annual discretionary spending by more than one per cent."

And the Labour Department said that the number of newly laid-off Americans requesting jobless benefits fell for the third time in the past four weeks. Initial claims for unemployment insurance dropped last week by 24,000 to a seasonally adjusted 601,000.

Gains were buoyed by strong results in an auction for 30-year Treasury bonds. Investors have been worried about rising interest rates and weak results from other Treasury auctions recently, which helped send stocks lower Wednesday.

"The bond market is a potential risk to the stock market if yields continue to move higher," said Dean Curnutt, president of Macro Risk Advisors.

"A further rise in yields (interest rates) threatens to choke off a recovery."

The yield on the benchmark 10-year note fell to 3.87 per cent from 3.96 per cent late Wednesday.

Elsewhere on the TSX, the base metals sector moved up more than four per cent as the July copper contract in New York rose eight cents to US$2.45 a pound. Teck Resources (TSX:TCK.B) gained 54 cents to $20.69 and Sherritt International (TSX:S) jumped 48 cents to $5.55.

The utilities sector was also a boost, rising almost one per cent.

In that sector, natural gas shipper TransCanada Corp. (TSX:TRP) is partnering with the world's biggest oil company ExxonMobil Corp. (NYSE:XOM) on plans to build a US$26 billion Alaska gas pipeline to bring northern gas to southern markets. The project would compete against a rival pipeline plan by other big oil companies in Alaska and TransCanada shares were ahead 68 cents to $33.68.

The TSX gold sector faltered 0.8 per cent even as the August bullion contract in New York rose $7.30 to US$962 an ounce. Barrick Gold Corp. (TSX:ABX) declined 56 cents to C$38.31.

The telecom sector was off one per cent but Telus Corp. (TSX:T) shares rose 32 cents to $32.55 as it announced plans to invest more than $250 million in Quebec this year, with a focus on advanced wireless and wireline broadband infrastructure that includes health-care related technology.

In earnings news, shares in Lululemon Athletica (TSX:LLL) tumbled $2.26 or 13.45 per cent to $14.56 after the yoga and workout wear retailer reported that quarterly earnings fell to $6.5 million in the latest quarter from $8.5 million a year earlier. The Vancouver company also said it expects profit to be flat in the current quarter because of the troubled economy.

Transat AT Inc. (TSX:TRZ.B) said Thursday a record number of winter travellers helped boost the company's revenues and bottom line during the second quarter. The Montreal-based tourism giant reported profits of $42.2 million, up slightly from year-earlier net income of $41.7 million.

The company reported a top line of $1.12 billion, an increase from $1.08 billion recorded the year before and its shares ran ahead 17 cents to $10.27.