The S&P/TSX composite index gained 94.69 points to 12,327.52 while the TSX Venture Exchange climbed 12.33 points to 1,550.05. The Canadian dollar edged up 0.39 of a cent to 98.89 cents US.
The pipeline sector was also in focus after the U.S. State Department recommended that U.S. President Barack Obama reject TransCanada's (TSX:TRP) proposed $7-billion Keystone XL pipeline project that would carry Alberta bitumen south to Gulf Coast refineries in the U.S., although that is not the final word on the project.
Obama on Wednesday attributed the decision to a 60-day deadline that was imposed on him in the law extending the payroll tax cut by two months. TransCanada is expected to resubmit an amended plan. A major reason the project has met stiff opposition is because it would travel through a key Nebraska aquifer. Its shares were down 47 cents to $41.89.
"It's a great company, no matter how you slice it and I think ultimately it will get done," said John Stephenson, portfolio manager at First Asset Funds Inc.
He added it would be a much bigger setback if the project were killed outright instead of taking an alternative route.
Buying sentiment had improved shortly after the open when the IMF said it aims to add US$500 billion to its resources so it can give out new loans to help mitigate a worsening financial crisis. The Washington-based institution said its staff estimates that countries around the world will need about $1 trillion in loans over the coming years. Most of the concerns centre on the 17-nation eurozone, which has been embroiled in a debt crisis for around two years.
U.S. markets got an extra boost from investment bank Goldman Sachs delivered quarterly earnings that beat expectations.
It said net income fell 58 per cent to US$1 billion or $1.84 a share because of lower investment banking fees in a quarter marked by choppy financial markets. But that easily beat expectations of $1.28 a share.
Goldman's quarterly revenue fell 30 per cent to $6 billion and its shares were ahead $6.63 or 6.79 per cent to US$104,31.
The Dow industrials jumped 96.88 points to 12,578.95. The Nasdaq composite index gained 41.63 points to 2,769.71 while the S&P 500 index climbed 14.37 points to 1,308.04.
Sentiment was also helped along by data out Wednesday showing that U.S. factory output surged in December by 0.9 per cent, the most in year. Stronger demand for business equipment, vehicles and energy offered the most visible evidence that manufacturing has roared back from the depths of the recession.
On the TSX, the financial sector rose 0.56 per cent while Royal Bank (TSX:RY) advanced 63 cents to C$52.45 while Bank of Nova Scotia (TSX:BNS) gained 75 cents to $52.56.
Major dealmaking helped send the TSX industrials sector 2.24 per cent higher. Shares in Finning International Inc. (TSX:FTT) climbed $1.70 to $26.10 after it said it will acquire the Caterpillar distribution and support business formerly operated by Bucyrus in South America, the U.K., and Western Canada. The deal is worth US$465 million. Vancouver-based Finning is the world's biggest Caterpillar dealer.
Canadian National Railways (TSX:CNR) advanced 74 cents to $78.66.
The energy sector ran up 1.5 per cent as the February crude contract on the New York Mercantile Exchange kept most of Tuesday's $2 jump, losing 12 cents to US$100.59 a barrel.
Analysts said higher oil was supported in part by tension between Iran and Saudi Arabia, as well as a move by France to accelerate the EU's implementation of an embargo on Iranian oil exports.
Saudi Oil Minister Ali al-Naimi has said Saudi Arabia was ready to pump more oil if needed to make up for a shortfall in Iranian exports. That came as Iran warned Gulf nations not to make up any shortfall and that it may shut the Strait of Hormuz, which is used to transport about a fifth of the world's oil.
Suncor Energy (TSX:SU) gained 72 cents to $33.94 and Cenovus Energy (TSX:CVE) climbed 49 cents to $35.55.
The base metals sector gained 2.5 per cent as other commodity prices were weak with March copper ahead two cents at US$3.75 a pound after the Chinese economic report in particular sent the metal jumping nine cents Tuesday. China is the world's biggest copper consumer. Teck Resources (TSX:TCK.B) was up $1.07 to $40.92 while HudBay Minerals (TSX:HBM) was ahead 30 cents to $11.
The gold sector was flat even as February gold on the Nymex rose $4.30 to US$1,659.90 an ounce. Barrick Gold Corp. (TSX:ABX) faded 23 cents to $48.52.
The worsening economic climate was spelled out Wednesday by The World Bank which warned Wednesday of a possible slump in global economic growth. It also urged developing countries to prepare for shocks that could be more severe than the 2008 crisis.
The bank cut its growth forecast for developing countries this year to 5.4 per cent from 6.2 per cent and for developed countries to 1.4 per cent from 2.7 per cent. For the 17 countries that use the euro currency, it forecast a contraction, with a growth outlook to be negative 0.3 per cent from growth of 1.8 per cent.