Nymex crude oil briefly surged to a record high of $126.40 a barrel but was in negative territory for most of the session along with most commodities. Just prior to the session close, Nymex crude was down $2.12 to $123.83 and the CRB index down 2.67 to 424.81.

Two stocks were responsible for much of the gains on the TSX. EnCana announced plans to split into two separate entities and Research in Motion released its latest version of the Blackberry.

Toronto's S&P/TSX composite index closed up 145 points to 14666. The index also hit a new intraday record of 14965. In the U.S., the Dow Jones industrial average was up 130 points to 12876, the S&P 500 was up 15 points to 1404 and the Nasdaq was up 43 points to 2488.

Economic news was relatively light in Canada. Statistics Canada reported prices rose in line with economists' expectations of a 0.2% monthly gain in March. In a speech to the Economic Club of Toronto, Canadian Finance Minister Jim Flaherty said cutting the debt and reducing taxes are cornerstones of the government's philosophy.

Yields on two-year Canadian government bonds are flat at 2.73%, with five-year yields down 2.7 bps to 3.12%, 10-year yields down 2.7 bps to 3.56% and 30-year yields down 2.6 bps to 4.06%. The Canadian 10-year note is yielding 23.06 bps less than the U.S. 10-year note.

In the U.S., Chicago Fed President Charles Evans said GDP growth will remain relatively sluggish but should see improvement in the second half of the year with a return to potential in 2009. Fed policy has been accommodative and appropriate, balancing the dual mandate between growth and inflation, Evans said, adding that growth risks remain to the downside while inflation risks remain to the upside.

"Evans, in comments today, largely repeated the themes from the April 30th FOMC statement. He reiterated that there are downside risks to growth and upside risks to inflation," wrote Benjamin Cheng, strategist at UBS, in a note to clients.

Energy prices and inflation remained a dominant theme throughout the day. FedEx Corp lowered its earnings guidance, saying surging fuel prices raised costs by at least $100 million more than estimated.

U.S. two-year yields are up 6.6 bps to 2.30%, with five-year yields up 4.1 bps to 3.01%, 10-year yields up 2.4 bps to 3.79% and 30-year yields up 1.1 bps to 4.53%.The Eurodollar September 08 contract is down 5.0 ticks to 97.32. The yield curve is flatter, with the 10/2-year spread down 3.5 bps to 148.99 bps.

George Adell, fixed income strategist from Commerce Capital Markets, said he expects the Treasury market to remain supported due to a record $90 billion coupon payment.

"That $90 billion is going to be looking for a home. And that is why I am saying there will be support for the market in the near term. Also, we are moving out of the period that is bearish for bond holders. The wild card in here is the credit crisis. Is that behind us? Certainly not. There are some people saying the end of the tunnel is in sight. I don't know if I can say that," Adell said.

British fixed income markets were down after numerous components of the UK's April producer prices data series rose to record highs. The Office for National Statistics said producers' input prices rose 2.4% in April from 1.7% in March, well above market forecasts for a 2.0% increase in seasonally adjusted terms. Year-over-year, April input prices rose 23.1%; the highest increase since records began in 1986. It follows a 20.5% rise in March and forecasts for a 21.7% increase.

Yields on UK two-year bonds are up 5.9 bps to 4.36%, with five-year yields up 4.3 bps to 4.31%, 10-year yields up 2.6 bps to 4.61% and 30-year yields flat at 4.46%.

In Germany, returns on two-year German bonds are up 5.9 bps to 3.76%, with five-year yields up 4.0 bps to 3.79%, 10-year yields up 1.6 bps to 4.01% and 30-year yields up 3.5 bps to 4.54%.

The Canadian dollar was up 0.0009 to 0.9957 against the U.S. dollar, higher by 1.04 to 103.33 against the yen and down 0.0039 to 1.0504 against the Australian dollar. The euro was up 0.0062 to 1.5622 and the pound sterling was up 0.0025 to 1.9665, both against the Canadian dollar.

The U.S. dollar was up 0.92 to 103.78 against the yen and down 0.0008 to 1.0045 against the Canadian dollar. The euro was up 0.0068 to 1.5549, the pound sterling was up 0.0037 to 1.9577 and the Australian dollar was up 0.0042 to 0.9477, all against the U.S. dollar.

On Tuesday, U.S. advance retail sales excluding auto are expected to increase 0.2% in April, up from a previous 0.1% increase.

Economists from BBVA USA wrote that despite forecasts for an increase, the bigger picture should be relatively gloomy. "We expect retail sales to remain unaltered in April as sales of autos declined and sales at gas stations rose in the month. Excluding autos, sales probably increased 0.1%, mostly inflated by the cost of gasoline," they said in a research note to clients.

Fedspeak ramps up in a big way on Tuesday with Chairman Ben Bernanke delivering a speech on liquidity measures as well as four others speaking on the economic outlook.

All data taken at 4:47 p.m. EDT.

By Adam Button, This email address is being protected from spam bots, you need Javascript enabled to view it , edited by Nancy Girgis, This email address is being protected from spam bots, you need Javascript enabled to view it