TORONTO (Reuters) - Toronto's main stock index bounced higher yesterday as market sentiment brightened and rising commodity prices helped lift the resource-heavy index after Monday's steep descent.

Rising gold and oil prices boosted the index's key materials and energy groups, up 1.8 percent and 1.9 percent respectively. "For the Canadian market it has a lot to do with materials, with the fact that gold is up a few dollars and then crude is also up a couple bucks. Any time those two go up our market does well," said Jennifer Radman, vice-president and associate portfolio manager at Caldwell Investment Ltd.

Ms Radman said the upbeat mood on Bay Street was helped by better than expected quarterly results from big US-based retailers Home Depot and Target.

"It has a lot to do with sentiment," she added.

Comments from Olivier Blanchard, chief economist at the International Monetary Fund, also helped brighten the mood. Blanchard said in an article the global recovery has begun, though it will take time for the economic scars to heal.

The S&P/TSX composite index finished the day up 142.25 points, or 1.35 percent, at 10,673.84, recovering some of Monday's 2.9 percent tumble.

Key gainers included EnCana Corp., ahead 2.7 percent at C$56.50, and Suncor Energy, up 1.5 percent at C$34.94.

Research In Motion Ltd. rose 4.3 percent to C$81.49 after RBC Capital raised its share price target for the BlackBerry maker, as well as for smartphone rivals Apple Inc and Palm Inc, citing strong growth in the sector.

The index's big financial group rose 0.5 percent, with many banking stocks posting gains after Genuity Capital Markets lifted price targets on the shares of Canada's big banks. Toronto-Dominion Bank climbed 0.48 percent to C$62.50.

Investors bid up US stocks as well, shrugging off an unexpected fall in US housing starts in July. "We got a little bit oversold yesterday so we're just bouncing back," said Levente Mady, market strategist at Union Securities in Vancouver.

The index dropped 316 points on Monday, battered by fears about the pace of economic recovery and the health of US consumer confidence.

The blue chip S&P/TSX 60 index closed 8.32 points, or 1.31 percent, higher yesterday at 641.9.