TORONTO -- Stock markets closed higher yesterday after the Federal Reserve said its latest survey of the American economy found activity in general remains "sluggish, subpar or subdued." The so-called beige book report boosted share prices and the Canadian dollar because "it confirms that the Fed sees the economy as sluggish enough to justify an interest rate cut," said Avery Shenfeld, senior economist at CIBC World Markets.

"They had factored in a quarter-point cut as a sure thing and now the speculation is what the odds are of actually going half a point, and those are increasingly looking like pretty close to an even bet."

The loonie picked up strength as the U.S. dollar weakened, closing up 0.55 cent at 74.00 cents US.

The energy sector helped move Toronto's S&P/TSX composite index 58.07 points higher at 7,100.77.

On Wall Street, the Dow Jones industrials rose 128.33 points to 9,183.22.

The Nasdaq was up 18.35 at 1,646.02 and the S&P 500 index climbed 12.64 points to 997.48.

Analysts said the market's momentum was driven by large amounts of cash that had been sitting on the sidelines.

"I think a lot of it tells you it's a liquidity-driven market," said Scott Kinnear, an economist with MMS International in Toronto.

"That money has to go somewhere. You don't want to be on the sidelines anymore."