However, a wave of caution set in late in the trading day and the S&P/TSX composite index closed well off session highs, coming down from a 352-point surge to move up 156.38 points to 13,861.52.
The energy sector was the biggest advancer by far, rising six per cent as oil prices had a rare positive day despite weak Chinese manufacturing data and as traders considered the effect of a desperate move by Russia's central bank to halt the plunge of the ruble.
The January crude contract in New York finished higher after four consecutive losing sessions had pushed crude down more than 12 per cent. On Tuesday, oil edged up two cents to US$55.91 a barrel.
Outside the resource sector, financials made a major contribution to the positive session on the TSX, up 0.78 per cent while industrials gained 1.57 per cent.
"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."
Oil prices have collapsed since mid-summer, down about 50 per cent amid a huge imbalance of supply and demand. Demand concerns were at the forefront earlier in the day after HSBC said its manufacturing purchasing managers index for China slipped 0.5 points to a seven-month low of 49.5.
Talisman Energy (TSX:TLM) made a big contribution to the energy sector's gain. Its shares rocketed 48 per cent to $8.84 as Spanish energy giant Repsol said that it will pay US$8.3 billion for all the shares of the Calgary-based company, or US$8 per share (C$9.33). Including assumed debt, the deal values Talisman at US$13 billion.
The Canadian dollar was ahead 0.15 of a cent at 85.94 cents US.
New York markets retreated with the Dow industrials down 111.97 points to 17,068.87, the Nasdaq off 57.33 points at 4,547.83 and the S&P 500 index 16.89 points lower at 1,972.74.
Also focusing financial markets Tuesday was a surprise move by Russia's central bank, which hiked its key interest rate to 17 per cent from 10.5 per cent in a move to prop up the ruble, which has lost half of its value this year, in large part because of western sanctions and plunging oil prices.
It's the central bank's biggest interest rate hike since 1998, a year when Russia defaulted on its sovereign bonds. But the move was in vain as the ruble lost further ground against the greenback.
In other news from the oilpatch, Encana (TSX:ECA) is bucking a trend that has seen several energy companies lower their capital expenditure forecasts. The Calgary-based company it is budgeting between $2.7 billion and $2.9 billion for capital spending next year, up from its 2014 estimate of between $2.5 billion and $2.6 billion this year. Encana shares gained $1 or 7.4 per cent to $14.53.
Elsewhere on the TSX, the base metals sector erased early advances to move down 0.8 per cent as March copper dipped two cents to US$2.86 a pound.
The gold sector faded about 1.75 per cent as early gains in bullion evaporated with February gold down $13.40 to US$1,194.30 an ounce a day ahead of the release of the U.S. Federal Reserve's latest announcement on interest rates.