TORONTO - Stock markets ended in positive territory Tuesday despite weak U.S. corporate earnings reports and a warning by the Bank of Canada that the recession will be deeper than it previously predicted.

Toronto's S&P/TSX composite index ended higher by 121.02 points at 9,247.17, reversing an early slide that followed the central bank's decision to cut its key policy rate by a quarter-point to 0.25 per cent in an effort to jolt the economy into life.

The Canadian dollar closed up 0.15 of a cent at 80.89 cents US, after briefly dipping below 80 cents in early action.

Diversified metals stocks led the TSX upward, gaining 11.4 per cent, powered by a 37 per cent gain for Teck Cominco Ltd. (TSX:TCK.B), up $3.36 to $12.47.

Financial stocks added 2.7 per cent as Scotiabank (TSX:BNS) rose $1.81 or 5.6 per cent to $34.33. The other big banks also posted solid gains, with the exception of Royal Bank (TSX:RY), off 20 cents to $41.40 after announcing an issue of up to $275 million in preferred shares.

Energy stocks gained 1.2 per cent as the May crude contract ended up 63 cents at US$46.51 a barrel on the New York Mercantile Exchange.

Gold stocks led the TSX declines, down 2.5 per cent, as the Nymex bullion contract lost $4.80 to US$882.70 an ounce.

American bank stocks gave the markets a jolt of energy after Treasury Secretary Timothy Geithner told Congress that some banks could be allowed to repay financial bailout funds. Geithner also said "the vast majority" of banks have more capital than they need.

Wall Street traders also assessed a mixed bag of earnings from big names including Coca-Cola and Caterpillar.

The Dow Jones industrial average rose 127.83 points to 7,969.56. The Nasdaq composite index increased 35.64 to 1,643.83 while the S&P 500 index added 17.69 points to 850.08.

Coca-Cola Co., the world's largest beverage maker, said its first-quarter profit fell 10 per cent to US$1.35 billion. Sales dipped three per cent to $7.17 billion.

Caterpillar Inc., the world's largest producer of construction and mining equipment, posted a first-quarter loss of US$112 million, down from a profit of $922 million a year ago. It was hurt by weaker sales and charges tied to layoffs.

The TSX Venture Exchange lost 1.05 points to 974.38.

Canadian and U.S. markets have advanced for six weeks leaving the TSX's main index and the Dow industrials ahead about 25 per cent since the rally took hold March 10. But major indexes suffered triple-digit losses Monday on renewed worries about U.S. banks grappling with growing bad debts.

"I think we're going to largely be sideways for the next couple quarters," said Larry Berman, chief investment officer at ETF Capital Management.

"I suspect from where we are now (we could go) 10 per cent higher or 10 per cent lower. That's pretty big volatility by historical perspective, but in context of where we've come from -- not so much."

On the TSX, Teck Cominco surged after it stabilized its debt situation while reporting a first-quarter profit of $241 million, off from $345 million a year ago although revenue was up 11 per cent to $1.71 billion.

Timminco Ltd. (TSX:TIM) continued its fall from grace, losing 23 per cent to $1.82 following Monday's 38 per cent drop on news that customers for its solar-panel-grade silicon are claiming their contracts have been terminated due to non-compliance. Timminco shares were worth over $35 last June after a dramatic run-up.

Canadian National Railway Co. (TSX:CNR) moved ahead $1.33 to $50.11 after announcing that retiring CEO Hunter Harrison will be succeeded at year-end by chief financial officer Claude Mongeau. That followed CN's report that quarterly earnings increased to $424 million from $311 million, thanks to a one-time gain.

In the flood of U.S. quarterly earnings reports, online brokerage TD Ameritrade Holding Corp. said its profit dropped 29 per cent to $132 million. TD Bank (TSX:TD), which owns almost half of Ameritrade, said it expects this to contribute C$48 million to its second-quarter net income.

New York Times Co. shares fell more than 17 per cent after it reported that first-quarter advertising revenue plunged 27 per cent.

Global drugmaker Merck & Co. posted a 57 per cent drop in first-quarter profit, falling short of expectations. It earned $1.43 billion, down from $3.3 billion in the same period last year.

Delta Air Lines Inc., the world's biggest airline operator, said it was hit hard by the weak economy but narrowed its net loss to US$794 million from $6.39 billion.

Overseas, Britain's FTSE 100 slipped 0.1 per cent, Germany's DAX index gained 0.3 per cent, and France's CAC-40 was up 0.2 per cent.

Japan's Nikkei stock average closed down 2.4 per cent, while Hong Kong's Hang Seng dropped three per cent.