The S&P/TSX composite index was 122.95 points higher at 11,876.48 as traders' spirits were lifted by positive signs about the state of the U.S. economy amid a slowdown in trading ahead of the holiday season.
The mining sector led the way higher, up 2.5 per cent, followed by a 1.8 per cent rise in both energy and financial stocks.
The TSX Venture Exchange moved up 3.96 points to 1,443.71.
The Canadian dollar added 0.45 of a cent to 97.93 cents US as oil prices neared US$100 a barrel amid signs of growing U.S. crude demand and concerns about global supply.
The February oil contract was up 86 cents at $99.53 a barrel and the February gold contract fell $3 to US$1,610.60 an ounce, while copper prices gained two cents to $3.42 a pound.
Wall Street also moved higher on encouraging economic data.
The Dow Jones average moved 61.9 points higher to 12,169.7. The Nasdaq index added 21.5 points to 2,599.5 and the broader S&P 500 index gained 10.3 points to 1,254.
As trading and the stream of economic news taper off in the last few days before the Christmas holiday period, traders are looking to be optimistic after a relatively weak year, said Ian Nakamoto, director research at MacDougall, MacDougall and MacTier.
"I think we're going to see what could be a bit of a rally from now to the end of the year, just (by) the very fact that some window dressing is pushing stocks up a notch."
Window dressing is a common phrase used to describe what usually occurs at year end as money managers buy up stocks that have been performing well to beef up their balance sheets.
On Thursday, traders took their more positive cue from good news on the U.S. jobs front, Nakamoto said. Data showed the number of people applying for unemployment benefits dropped last week to its lowest level since April 2008.
"That's the one area that looks good — is the U.S. economy — all other economies, including Canada, are still slowing down, (but) the U.S. is actually stabilizing and picking up here," he said.
The U.S. Conference Board also reported that its measure of future economic activity had a big increase last month. It was the second straight gain, signalling that the U.S. economy was picking up speed and the risk of another recession was fading.
It appears that investors were more focused on that positive news than a report that showed the U.S. economy grew more slowly in the summer than previously thought because consumers spent less than the government had first estimated.
The U.S. Commerce Department says the economy grew at an annual rate of 1.8 per cent in the July-September quarter. That was the fastest growth this year, up from 1.3 per cent in the April-June quarter. But it was down slightly from last month's estimate that the economy was expanding at a two per cent rate in the summer.
There was also little market impact from news that the Supreme Court of Canada shot down the federal government's attempt to create a national stock market regulator, ruling unanimously that the legislation presented to it "overreaches" into provincial jurisdiction.
While not binding, Thursday's decision likely brings to an end to Finance Minister Jim Flaherty's five-year drive to replace the fragmented regime of 13 provinces and territories that currently regulate securities, to the consternation of most stock market participants who favour the single regulator approach.
Meanwhile, the Conference Board of Canada said early Thursday that consumer confidence has hit its lowest level in more than 2 1/2 years. The think-tank says its Index of Consumer Confidence posted a 6.5-point drop in December, bringing 2011 to a disappointing close.
Statistics Canada reported average weekly earnings of non-farm payroll employees increased 1.4 per cent to $885.36 in October. It said average weekly earnings were up 2.7 per cent from a year earlier.
In Canadian corporate news, Miranda Technologies Inc. (TSX:MT) says it doesn't expect dissident shareholders to have enough support to force a special meeting to replace four of the company's sitting directors. Shares slipped five cents to $9.28.
Workers at Noranda Income Fund's (TSX:NIF.UN) Salaberry-de-Valleyfield zinc processing plant have voted in favour of a new labour agreement. Shares were unchanged at $5.50.
Thomson Reuters (TSX:TRI) said it is suspending its search for a buyer for its healthcare data business due to challenging economic conditions. Shares were up 38 cents at $26.76.