The S&P/TSX composite index was 11.31 points higher at 13,125.7.
The Canadian dollar closed up 0.4 of a cent at 94.38 cents US.
U.S. indexes were similarly lacklustre after three days of losses as the Dow Jones industrials edged 15.93 points higher to 15,755.36, the Nasdaq added 2.57 points to 4,000.98 and the S&P 500 index slipped 0.18 of a point to 1,775.32.
Expectations about the Fed tapering its US$85 billion a month of bond purchases have changed over the last month. Previously markets largely expected that the U.S. central bank would hold off until March when incoming chair Janet Yellen is settled in her new job.
But a string of strong data last week, capped by a solid employment report for November, has raised concerns that the Fed could act as soon as next week when the Federal Open Market Committee meets Dec. 17-18.
A better than expected retail sales report for November and the passage of a budget agreement in the U.S. Congress further served to raise expectations.
But that doesn't mean everyone is convinced the Fed is set to move next week.
Wes Mills, chief investment officer for Scotia Asset Management PM Advisor Services, thinks the Fed will wait until March when Yellen has had some time on the job and sees more indications of an improving economy.
"You’re just coming back from this government shutdown and all that," he said. "We haven’t seen two or three months strung together that we can really point to with solid conviction that this hasn’t been influenced by something else."
Mills added that the uncertainty about the Fed will continue to be an overhang if it doesn’t move next week.
But he believes "the market will very quickly factor that in and drive on and start to focus on earnings more because . . . now if we’re going to go higher we need earnings."
The U.S. stimulus has lifted stocks over the past few years and its potential reduction has jolted markets since May when outgoing Fed chair Ben Bernanke first mentioned the possibility of tapering. However, any cutback in asset purchases would be gradual and is expected to be accompanied by a renewed commitment by the Fed to keep interest rates low.
Both Toronto and New York markets gave up ground this week amid the Fed speculation, with the TSX down 1.17 per cent for the week and the Dow industrials falling 1.65 per cent. The TSX is up 5.56 per cent for the year to date and the Dow has surged 20.2 per cent.
The consumer discretionary sector was the biggest advancer, up 0.55 per cent with retailer Reitmans (TSX:RET.A) ahead 28 cents to $6.24 while auto parts giant Magna International (TSX:MG) gained $1.17 to $83.74.
The much battered gold sector, down 50 per cent for the year, was up about 0.4 per cent as February bullion gained $9.70 to US$1,234.60 an ounce. Barrick Gold (TSX:ABX) rose 28 cents to C$17.76.
The energy sector was slightly higher as January crude on the New York Mercantile Exchange declined 90 cents to US$96.60 a barrel.
Telecoms were weak after the CRTC announced it will look at wholesale rates charged to small wireless firms by the big players including Rogers (TSX:RCI.B), Bell (TSX:BCE) and Telus (TSX:T). The federal telecom regulator wants to know if big players are putting these small players at an unfair disadvantage with the wholesale roaming rates they charge. Rogers shed 62 cents to $47.02.
The base metals sector was slightly lower even as March copper rose two cents at US$3.31 a pound. First Quantum Minerals (TSX:FM) lost 20 cents to C$17.
Traders also digested comments by Chinese leaders that the world’s second-largest economy faces “downward pressure” and have called for boldness in carrying out promised reforms aimed at reviving slowing growth.
In a report following an annual planning meeting, Communist party leaders said Friday that the country faces problems including excess production capacity in some industries and environmental degradation.