The S&P/TSX composite index gained 45.32 points to 13,475.33, held back by gold stocks as Fed tapering concerns continued to punish bullion prices.
The Canadian dollar fell 0.67 of a cent 95.05 cents US.
The greenback gained ground against other currencies in the wake of the release of the minutes of the last Fed meeting which showed that the central bank would likely start tapering its bond purchases in "coming months" if the job market improved further. Fed members also weighed the possibility of slowing the US$85 billion of monthly bond purchases even without clear evidence of a strengthening job market.
New York markets were higher amid data showing the number of people applying for U.S. unemployment benefits fell to the lowest since September.
First-time applications for benefits dropped by 21,000 last week to a seasonally adjusted 323,000. The number of applications, which is a proxy for how many workers are being laid off, is now near where it was before the Great Recession.
The Dow Jones industrials closed above the 16,000-mark for the first time, running ahead 109.17 points to 16,009.99. The Nasdaq was ahead 47.88 points to 3,969.15 while the S&P 500 index rose 14.48 points to 1,795.85.
Markets lost ground Wednesday following the release of the Fed minutes with traders caught unaware by their content.
Janet Yellen, who is slated to become the next Fed chairman, had expressed strong support for low interest rate and bond buying policies aimed at stimulating U.S. growth during her confirmation hearing last week.
"So then you get into this well, who is really in charge and are we getting the right message?" asked Wes Mills, chief investment officer at ScotiaMcLeod Portfolio Advisory Group.
"The markets were already a little overextended, people were getting nervous for a variety of reasons. This comes out, some hot money bails and they think about it overnight and think, I guess it wasn’t that different."
The central bank's monthly purchase of bonds has kept long-term rates low and pushed investors into stocks, underpinning substantial gains on many markets this year.
But those long-term rates were on the rise Thursday with the yield on the U.S. 10-year Treasury note continuing to climb as investors sold bonds. The yield was 2.79 per cent, down 0.01 of a point from late Wednesday, after rising to around 2.84 per cent earlier in the day.
On the commodity markets, January crude on the New York Mercantile Exchange gained $1.59 to US$95.44 a barrel. The energy sector led gainers, rising almost one per cent. Cenovus Energy (TSX:CVE) rose 51 cents to C$31.13.
Industrials were ahead 0.9 per cent with Canadian Pacific Railway (TSX:CP) ahead $3.24 to $157.07.
Telecoms were also positive with Telus (TSX:T) ahead 27 cents to $37.34.
The base metals sector was up 0.31 per cent with December copper up three cents to US$3.19 a pound.
The gold sector led decliners, down 0.8 per cent as December bullion shed $14.40 to US$1,243.60 an ounce, its lowest close since early July. Kinross Gold (TSX:K) slipped six cents to C$4.90.
On the corporate front, Target Corp.’s (NYSE:TGT) third-quarter net income dropped 47 per cent, stung by costs related to its expansion into Canada. Its adjusted profit beat analysts’ estimates, but revenue fell short. The department store operator also lowered its full-year adjusted earnings forecast.
Target earned US$341 million, or 54 cents per share. Removing Canada-related expansion costs and other items, earnings were 84 cents per share, 20 cents ahead of estimates and its shares fell US$2.30 to US$64.19.
Clothing maker Gildan Activewear Inc. (TSX:GIL) fell $1.70 or 3.3 per cent to $49.60. The company, which reports in U.S. currency, estimated it will have between $3 and $3.10 per share of adjusted earnings and $2.35 billion of revenue for the year ending next September. Analysts had been expecting 2014 adjusted earnings would climb to $3.14 per share with $2.38 billion of revenue.
Gildan, which posted quarterly adjusted earnings that met estimates and revenue that beat, also said it is boosting its quarterly dividend by 20 per cent to 10.8 cents per share.