By Malcolm Morrison, The Canadian Press

TORONTO - The Toronto stock market maintained a solid lead Tuesday as gold stocks surged on record high bullion prices, railway stocks gained following major acquisition activity in the United States and oil prices advanced.

The S&P/TSX composite index was down as much as 124 points in early trading but by mid-afternoon was up 79 points to 10,957.4.

However, the TSX had lost more than five per cent over the last seven sessions as investors worry about whether economic conditions can support the sharp gains racked up since March.

"The bar is being raised on what constitutes good news," said Avery Shenfeld, chief economist at CIBC World Markets.

"Three or four months ago, not bad news was good enough to lift the stock market and I think now, at current levels, the market is more demanding in terms of what it wants to see, both on corporate results and particularly on economic data."

That point of view was reinforced by the lack of positive reaction to a rise in U.S. factory orders in September.

The Commerce Department reported that orders to U.S. factories rose 0.9 per cent, slightly better than the 0.8 per cent advance economists expected.

The Canadian dollar was up 0.84 of a cent to 93.62 cents US as the U.S. dollar weakened.

The gold sector was ahead 5.6 per cent as the December gold contract on the New York Mercantile Exchange gained $30.90 to US$1,084.90 an ounce after rising to a record intraday high of US$1,087. The surge came as the International Monetary Fund said it sold 200 metric tons of gold to the Reserve Bank of India and the American dollar lost strength. Goldcorp Inc. (TSX:G) gained $2.26 to $42.40 while Barrick Gold Corp. (TSX:ABX) was up $2.17 to $41.56.

The TSX industrial sector was ahead 1.46 per cent after Warren Buffet's Berkshire Hathaway said it was buying Burlington Northern Santa Fe in a deal valuing the railway at US$34 billion.

Berkshire Hathaway Inc. already owns a stake of about 22 per cent in Burlington Northern, and says it will pay $100 a share for the rest of the company. That is a 32 per cent premium over Burlington's closing price Monday. The deal sent Canadian railway stocks higher with Canadian National Railway (TSX:CNR) ahead 89 cents to C$53.46 while Canadian Pacific Railway (TSX:CP) advanced $1.45 to $48.67.

The energy sector was slightly lower even as oil prices reversed early losses. The December crude contract on the New York Mercantile Exchange moved up $1.07 to US$79.20 a barrel. On the TSX, Suncor Inc. (TSX:SU) declined 62 cents to C$34.97.

The base metals sector was ahead 0.5 per cent as the December copper contract on the Nymex advanced 0.3 of a cent to US$2.948 a pound. HudBay Minerals (TSX:HBM) gained 59 cents to C$14.21.

Consumer discretionary stocks were weakest, with Shaw Communications (TSX:SJR.B) down 29 cents to $19.19.

The TSX Venture Exchange was ahead 25.78 points to 1,315.4.

New York indexes were mixed amid uncertainty about a raft of key economic developments later this week, which culminates in Friday's closely watched U.S. non-farm payrolls report for October. Statistics Canada also releases October employment data Friday.

And ahead of those announcements, the U.S. Federal Reserve is holding its scheduled meeting on interest rates and will issue a statement on rates and the economy Wednesday afternoon.

The Dow Jones industrial average declined 14.3 points to 9,775.2.

The Nasdaq composite index moved 1.23 points higher to 2,050.43 while the S&P 500 index gained 2.2 points to 1,045.1.

The TSX financial sector was weak as investor unease grew amid further efforts to restructure two of the U.K.'s largest banks. Lloyds said it was looking to raise about US$34 billion through a share issuance, while the Royal Bank of Scotland got a US$41-billion infusion from the government.

And Swiss bank, UBS AG, reported a third-quarter loss of about US$542 million, due to hefty accounting charges.

In Toronto, Royal Bank (TSX:RY) was down 62 cents to $54.26.

Elsewhere on the markets, a day after reporting a solid quarterly profit, Ford Motor Co. said strong demand for cars and crossovers lifted its U.S. sales by three per cent in October.

Sales rose 21 per cent from September to 118,735 vehicles in October, when auto sales were still in a hangover after the Cash for Clunkers program boosted sales this summer.

Chrysler Group LLC says its October sales fell 30 per cent below the same month last year but that sales were up six per cent from September.

On the Canadian earnings front, Talisman Energy Inc. (TSX:TLM) saw its profits plunge in the third quarter as falling commodity prices and lower production output took their toll on earnings. The company reported a net income of $30 million or three cents per share, a significant drop from a year-ago profit of $1.4 billion or $1.40 per share. Talisman revenue was $1.5 billion, down from $2.7 billion in the same period last year and its shares declined 15 cents to $18.18.

Increased gold production, combined with higher metal prices, helped Northgate Minerals Corp. (TSX:NGX) narrow its losses in the third quarter as revenues rose. Northgate posted a net loss of $8.6 million, an improvement from a year-ago net loss of $29.4 million. Quarterly revenues totalled $120.2 million, up from $99.3 million a year ago and Northgate shares gained 13 cents to $2.92.

Groupe Aeroplan Inc. (TSX:AER), the loyalty program company spun off from Air Canada (TSX:ACE), is expanding its international business with the $188-million purchase of Carlson Marketing, a U.S.-based customer-loyalty company that also has a presence in Europe, Asia and the Middle East. Its shares were off 13 cents at $8.77.