However, economic concerns pressured oil prices and traders awaited more clarity on what the Federal Reserve may decide to do about cutting back on a key stimulus measure.
The S&P/TSX composite index gained 82.09 points to 12,670.11, making up a bit more than half of Monday's 149-point slide.
The Canadian dollar was down 0.43 of a cent to 96.26 cents US.
New York indexes were mixed amid better than expected earnings from retailers Best Buy, Home Depot and J.C. Penny.
The Dow Jones industrials gave up early gains to lose 7.75 points to 15,002.99, the Nasdaq gained 24.5 points to 3,613.59 while the S&P 500 index added 6.29 points to 1,652.35.
Traders looked ahead to Wednesday and the release of the minutes from the Fed's most recent meeting at the end of last month.
A largely positive run of economic data has persuaded many investors that the central bank will start to taper its monthly bond purchases of US$85 billion, starting as early as September. The stimulus program has kept long term rates low and encouraged a sharp run-up on many markets this year.
"Clearly this whole debate about whether we see the onset of tapering in September has taken centre stage," said Garey Aitken, chief investment officer at Bissett Investment Management in Calgary, who also pointed out that seasonality is playing a part.
"We’re in the summer doldrums, we’re out of earnings season . . . so what is everybody focused on? You focus on what’s in front of you. So it’s probably got a bit more of a pronounced effect."
The TSX gold sector ran up about 3.75 per cent while gold ticked $6.90 higher to US$1,372.60 an ounce.
The sector was punished along with gold prices after Fed chairman Ben Bernanke first mentioned the possibility of the Fed cutting back in May. It hit a recent low in late June, leaving the gold sector down about 50 per cent year to date. It has since improved and the sector is down about 30 per cent so far in 2013.
"We’ve seen a kind of natural bounce back from probably overdone levels with the producers — we’ve seen a better gold price in the last five or six weeks," Aitken said.
"Those producers fell more than the price of gold had declined."
Goldcorp Inc. (TSX:G) gained 86 cents to C$32.89.
The utilities sector also provided lift, up 0.75 per cent. Utilities and other interest sensitive stocks have been a major drag as the prospect of the Fed tapering its massive bond purchases has sent U.S. bond yields higher.
The benchmark U.S. 10-year Treasury was off 0.06 of a point from late Monday at 2.82 per cent. Still, bond yields have surged well over a full percentage point since Bernanke's remarks in May. Just Energy Group (TSX:JE) gained 16 cents to $6.32.
The energy sector was ahead per cent while speculation over Fed intentions pushed the September crude contract on the New York Mercantile Exchange down $2.14 to US$104.96 a barrel. Canadian Natural Resources (TSX:CNQ) gained 29 cents to C$30.96.
The financials group ran up 0.6 per cent with Royal Bank (TSX:RY) up 65 cents to $64.67.
The base metals sector rose 0.52 per cent while copper was ahead a penny at US$3.34 a pound. Turquoise Hill Resources (TSX:TRQ) climbed 19 cents to C$5.30 while Teck Resources (TSX:TCK.B) headed 57 cents lower to $27.54.
Elsewhere in the mining sector, BHP Billiton said its annual profit dived nearly 30 per cent to $10.9 billion as slower growth in China and other emerging economies resulted in lower prices for copper, coal and iron ore. Annual revenue sank nearly nine per cent to $66 billion.
Home Depot beat expectations and raised its outlook. The company earned US$1.8 billion, or $1.24 per share, while revenue climbed more than nine per cent to $22.52 billion. Analysts expected earnings of $1.21 per share on revenue of $21.79 billion. Its stock slipped 91 cents to $74.30.
J.C. Penney Co. stock rose 77 cents to $13.99 despite another big loss on a nearly 12 per cent drop in revenue for the second quarter. It lost $586 million, or $2.66 per share while revenue reached $2.66 billion. Analysts were expecting a $1.07-per-share loss on revenue of $2.77 billion.
Electronics retailer Best Buy earned 32 cents per share in the last three months, much better than the 12 cents per share financial analysts expected. Most of the growth came from cutting costs and focusing on online sales and its shares jumped $4.03 or 13 per cent to $34.76.
On the Canadian retail front, Sears Canada (TSX:SCC) is cutting 245 jobs, mostly at its head office in Toronto and mainly in the information technology and finance departments. Its stock fell 73 cents to $12.27.