The TSX had nearly wiped out all of this year’s gains by Monday’s close, after following oil prices downward.
But on Tuesday, it shot higher again to 13,924, with buyers snapping up energy and financial stocks that have suffered in the fall downturn.
Oil prices also halted the steep decline they've been in since September. The January crude contract in New York rose in the morning, but ended the day seven cents higher at $55.98 US a barrel range after a drop of $2 on Monday.
Western Canadian Select, the contract traded by many Canadian suppliers, edged above $40, up $1.20 at $40.01 US.
The apparent stabilization of oil prices helped Toronto's energy sector rise by seven per cent.
Much of the gain in energy stocks was the result of Spanish energy giant Repsol’s $15-billion bid for Talisman, whose shares rose by 47 per cent after the offer of $9.33 Cdn was revealed.
Buyers also sought out financial stocks, which have suffered along with oil prices.
Meanwhile, they shrugged off news that Canadian manufacturing sales declined 0.6 per cent in October to $52.7 billion.
"The Canadian market is oversold, oil prices of course have been in free fall and they continue to fall today — everyone seems to be trying to pick a bottom," said Himalaya Jain, a portfolio manager at ScotiaMcLeod.
"There's no question that there are some very good opportunities right now in the Canadian energy sector. But the question is, do they go lower first and then eventually go higher or is this the bottom? And that's not something that anybody, even the people buying today, can answer."
The Canadian dollar, which fell yesterday below 86 cents US, edged up slightly to 85.88 US. The loonie was buoyed, in part, by Russia’s surprise move to boost its interest rates to 17 per cent from 10.5 per cent in a move to prop up the ruble.
Oil prices and Western sanctions have played havoc with the Russian economy, and the move failed to help the ruble, as traders fled to safer currencies.Suggest a correction