The S&P/TSX composite index rose 27.98 points to 15,510.54.
The loonie was up 0.66 of a cent to 91.16 cents US as the latest data showed that Canadian manufacturing sales in July handily beat analysts' expectations.
Statistics Canada said sales rose 2.5 per cent to $53.7 billion in July, exceeding the previous record of $53.2 billion set in July 2008. Economists had only expected a gain of just one per cent, according to Thomson Reuters.
Meanwhile, Wall Street reversed early losses, with the Dow Jones industrials surging 100.83 points to 17,131.97, the Nasdaq gaining 33.86 points to 4,552.76, and the S&P 500 index advancing 14.85 points to 1,998.98.
Markets will look to see if the statement released by the Fed on Wednesday following its two-day meeting contains hints on when the central bank will raise interest rates and if this move will happen sooner than mid-2015. Short-term rates have been near zero since the financial collapse of 2008-09.
For some time, the Fed has reassured markets that the rates will stay at this level for a "considerable time" after its asset purchase program end in October. Traders will look to see if the Fed drops the words "considerable time" in this latest announcement.
"All eyes are on the Fed," said Allison Mendes, a senior portfolio manager at Manulife Asset Management. "As you know, the decision is tied closely to data and we've had a string of good economic data and that is causing the market to evaluate the timing of the next Fed action."
Mendes said the writing is on the wall that interest rates will eventually go up, but many are still left wondering when the central bank will actually make that happen.
"You can't have interest rates low, sustainably, forever and interest rates hike are coming," she said.
Overseas, there continues to be uncertainty over the outcome of the Sept. 18 independence referendum in Scotland. Anti-independence supporters argue that separation would cause economic uncertainty, while Yes supporters accuse the No side of scaring voters. Most think the outcome is too close to call at this point.
A Yes vote would result in huge complications from currency to membership in the European Union and NATO.
"Scotland is a small country, but (one) that's going to have some economic and financial fallout and that just adds another layer of uncertainty in the markets," Mendes said. "As you know, investors don't like uncertainty."
In corporate news, an investment group that includes Wind Mobile founder Tony Lacavera and Canadian private equity firm West Face Capital has a tentative deal to buy out Wind's majority shareholder, VimpelCom Ltd., a Russian-Dutch company that has been trying to exit the Canadian market since it was blocked from gaining full ownership of the small wireless carrier last year. Financial terms of the deal were not released. The telecom sector was the leading decliner on the TSX, ending the day down 0.52 per cent.
Meanwhile, Allergan and Pershing Square have agreed on a step toward settling a fight over the makeup of the Botox-maker's board. Allergan will hold its special shareholders meeting as planned on Dec. 18, while Pershing Square and its partner, Valeant Pharmaceuticals, continue their push for control of the California-based drug company. Valeant, based in Laval, Que., has made several offers to buy Allergan, the latest bid coming in at US$53 billion. Shares in Valeant (TSX:VRX) dipped 0.12 per cent, or 16 cents, to $134.03 in Toronto.
On the commodity markets, the October crude contract on the New York Mercantile Exchange gained $1.96 to US$94.88 a barrel after OPEC's secretary general said he expected the group to lower its oil outputs for the year when it meets in late November. December gold bullion added $1.60 to US$1,236.70 an ounce, while December copper was up eight cents to at US$3.17 a pound.
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