TORONTO (Bloomberg) — Canadian stocks notched their best first day of the year since at least 1977 as commodity producers rallied from last year's record drop on higher oil and metals prices and prospects that government spending will spur demand.

Suncor Energy Inc. gained rose 8.5 percent as crude-oil prices rebounded from their worst annual decline. FNX Mining Co. climbed as nickel prices gained the most in 21 years. Nine of 10 industries in the main stock index gained.

The Standard & Poor's/TSX Composite Index rose 2.7 percent to 9,234.11 in Toronto, the best start to a year since Bloomberg records began. The main benchmark for Canadian stocks has risen 11 percent in four sessions, its steepest weekly gain since November 28. It shed 35 percent in 2008, its worst year since 1931.

"People are moving on and looking forward," said Jean- Rene Adam, who helps manage about $1 billion as a portfolio manager at Hexavest Inc. in Montreal. "I wouldn't be surprised to see a rally at the beginning of 2009."

Stocks in Toronto extended their rally from a five-year low on November 20 to 20 percent yesterday for a second time.

"A lot of money is being put into the economy," said Adam. "Metal and mining stocks have corrected a lot. At these levels these stocks look interesting. The worst is priced in."

Crude oil for February delivery rose 3.9 percent to $46.34 a barrel in New York, capping its biggest weekly gain since 1986, as the conflict in Gaza stoked concern that Middle East supplies would be cut and Russia curbed natural-gas shipments to Ukraine. Oil dropped 54 percent last year. Natural gas futures rose as much as 6.2 percent in New York.

Suncor Energy, the world's second-biggest oil-sands producer, rose eight percent to C$25.62. Canadian Natural Resources Ltd., the country's second-biggest natural-gas producer, climbed 6.7 percent to C$51.99. Larger rival EnCana Corp. gained 4.9 percent to C$59.75. Petro-Canada, the nation's third-largest oil and gas producer, climbed 8.9 percent to C$29.10, the most since November 28.