The S&P/TSX composite index ended ahead 52.73 points to 12,370.19 on the first trading day of the fourth quarter. The main index had moved as much as 135 points higher earlier in the session.
The TSX Venture Exchange crept up 4.19 points to 1,338.70, and the Canadian dollar gained 0.05 of a cent to 101.76 cents US.
Ben Bernanke defended the Fed's moves to stimulate the economy in a speech to the Economic Club of Indiana in Indianapolis. He said the Fed's strategy remains the same, and that it needs to drive down borrowing rates because the economy isn't growing fast enough to reduce high unemployment.
The state of the U.S. economy has been a persistent concern, though the latest data from the Institute for Supply Management, a trade group of U.S. purchasing managers, offered a little relief. The index of factory activity rose to 51.5 in September, up from 49.6 in August. A reading above 50 signals expansion and below indicates contraction.
"You are going to see some signs of encouragement from that, but at the same time exports are still shrinking," said Gavin Graham, president of Graham Investment Strategy Ltd.
China's Purchasing Managers' Index for September came in at 49.8, marking a further contraction in activity in the region. Meanwhile, the eurozone's manufacturing sector experienced a better month, though its September PMI still contracted for the 14th consecutive month.
"If the weakness in China and Europe continues, those are major markets for the U.S., it's going to be difficult for it to disclose strength," Graham added.
Also, the results of an independent audit of 14 Spanish banks were released after the market close on Friday and showed lenders need an extra €60 billion (US$77.6 billion) in capital. The figure is roughly as expected and well within the €100 billion in rescue loans that Madrid can get from fellow eurozone countries to help the banks.
But there were still concerns that Moody's ratings agency could downgrade Spain's debt rating to junk status.
On Wall Street, the Dow Jones industrials rose 77.98 points to 13,515.11. The Nasdaq composite index slid 2.70 points to 3,113.53 and the S&P 500 index was up 3.82 points to 1,444.49.
In commodities, November crude on the New York Mercantile Exchange gained 29 cents to US$92.48 a barrel. The TSX energy sector was up 1.3 per cent.
The gold sector moved higher as December gold bullion increased $9.40 to US$1,783.30 an ounce, while December copper was up 2.8 cents at US$3.79 a pound.
In Canadian corporate developments, Magna International Inc. (TSX:MG) said it has signed a deal to buy Ixetic Verwaltungs GmbH, a manufacturer of automotive vacuum, engine and transmission pumps for €308 million. The company also said a subsidiary has signed a deal with a joint-venture partner to buy the remaining 50 per cent stake in STT Technologies, a supplier of transmission and engine oil pumps. Shares of Magna rose 1.8 per cent, or 76 cents, to $43.27.
Wi-LAN Inc. (TSX:WIN) said it has bought a portfolio of more than 150 patents and patent applications from Alvarion Ltd. for $19 million. Its shares were down two cents to $5.51.
Agrium Inc. shares (TSX:AGU) rose nearly 1.7 per cent to C$103.69 on the Toronto Stock Exchange. In New York, the stock shot up 2.1 per cent to US$105.53. An investor pushing for changes at Agrium laid out its case publicly for the first time on Monday, arguing it could add US$50 to the Canadian fertilizer company's share price.
And two Canadian companies made changes to their top positions.
Molson Coors Brewing Co. (TSX:TPX.B) appointed a new chief executive to head its Canadian operations while merging its U.K. business with the recently acquired StarBev. Its shares were off five per cent, or $2.45, at $42.55.
SNC-Lavalin's chief executive made his first speech while in the new role. Robert Card said he is keeping all options open as he looks to regain investor confidence in the embattled engineering and construction company. Shares fell 35 cents to $37.60.