Close The share market ended more than 1 per cent higher as hopes of an economic recovery lift sentiment.

At the close, the benchmark S&P/ASX200 index was up 48.6 points, or 1.1 per cent, at 4570.8, while the broader All Ordinaries rose 46.4 points, or 1 per cent, to 4573.5.

Nearly all sectors were higher, with financial stocks rising 1 per cent, energy up 1.7 per cent and materials gaining 1 per cent. Gold stocks, which in the past days had posted strong rises on the back of a gold price rally, dropped 1.8 per cent.

Bell Potter Securities senior client adviser Stuart Smith said overall exuberance and data showing a steady unemployment rate, pushed the market higher but that a correction was now overdue.

"I think we're overdue for a correction and I'm not alone. Valuations are stretched,'' he said.

The number of job losses exceeded expectations but the unemployment rate remained steady at a seasonally adjusted 5.8 per cent in August. Mr Smith said the employment figures were just about "spot on''.

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Retail stocks surged after the unemployment data, with Harvey Norman and David Jones jumping almost 4 per cent ahead of Friday's annual results presentation by Myer.

Myer is tipped to unveil plans of a $3 billion float for the company, which is majority owned by private equity players Texas Pacific Group.

Harvey Norman finished 15 cents higher at $4.06 and David Jones gained 20 cents to $5.20.

Retailers benefited from the jobs data as they dimmed chances of an immediate interest rate increase, analysts said.

Gold hit by profit-taking

Mr Smith said profit-takers moved on local gold stocks after the precious metal price dropped back to under $US1000 an ounce.

"Since the 1960s, every decade gold has been promised to go to $US3000 (per fine ounce) and it never does,'' he said.   

Lihir Gold fell 10 cents to $2.99, Newcrest Mining lost 70 cents to $33.56 and dual-listed Newmont eased 8 cents to $5.30.

Ansell, the world's top maker of latex gloves, fell 2.4 per cent to $9.25 on surprise news that chief executive Doug Tough would step down in March 2010.

Good day for banks

Commonwealth Bank closed 63 cents stronger at $47.28. National Australia Bank gained 17 cents to $28.82, ANZ Banking Group firmed 11 cents to $22.31 and Westpac advanced 12 cents to $24.39.

Regional bank and insurance corporation Suncorp Metway fell 18 cents, or 2.2 per cent, to $7.97.

Macquarie Group finished 21 cents higher at $49.93 after it reiterated its first-half profit forecast given at its annual general meeting in July. This was equivalent to a 28 per cent decline from a year earlier to $435.5 million.

The investment bank said the operational performance of most of its major businesses improved in the first quarter of this financial year from the preceding three-month period.

Resources giant BHP Billiton rose 31 cents to $38.00 and Rio Tinto put on 67 cents to $58.85.

Oil stocks were stronger, with Santos jumping 52 cents to $15.65, Woodside Petroleum adding $1.10 to $48.40 and Oil Search up 2 cents to $6.37.

Strong start for carsales.com

Online automotive advertising business carsales.com made a strong debut on its first day on the ASX. Under its offer, carsales.com sold 46.39 million previously existing shares and 350,000 new shares to investors at $3.50 each. The stock initially ended the day at $3.99, up 14 per cent.

Media stocks were higher across the board, with Fairfax Media leading the sector. Fairfax jumped 5.5 cents to $1.66, rival News Corp firmed 21 cents to $15.25 and its non-voting scrip gained 26 cents to $13.10.

Airline stocks flew higher, with national carrier Qantas jumping 11 cents to $2.65 and Virgin Blue Holdings surged 3 cents to 38.5 cents.

Last week Virgin announced it had raised $98.3 million in a non-renounceable rights issue. The 1.16 billion new shares commenced trading on the local bourse yesterday.

Boart Longyear was the top traded stock by volume, with 158.88 million shares changing hands for $44.11 million.    Boart's stock firmed 0.5 cents, or 1.82 per cent, to 28 cents.   

Preliminary national turnover reached 3.27 billion shares worth $5.86 billion, with 707 stocks up, 410 down and 340 steady.

Cyclical stocks run hardest

"The cyclical stocks are running the hardest, which indicates that people are expecting an uptick in the economic backdrop," said Simon Burge, chief investment officer with Above the Index Asset Management.

Cyclical stocks are broadly classified as companies whose earnings swing with economic cycles.

"There are signs that FY10 could witness the emergence of a slow and long recovery," Moody's said in a report today.

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AAP, with BusinessDay