The S&P/TSX composite index was up 112.71 points at 15,326.31, extending its more than week-long rally. The Canadian dollar was down 0.34 of a U.S. cent at 79.42 cents.
Norman Raschkowan, senior partner at Sage Road Advisers, says news of the Shell and BG merger has left some traders hopeful about the possibility of a new round of takeovers and mergers in the energy space.
"Almost every Canadian energy company could be a potential target, if deals can be done of that size," Raschkowan said.
The energy sector climbed 1.5 per cent, while the financials sector was up 0.73 per cent.
Raschkowan says investors are rethinking the Canadian banks which, despite their exposure to the oil patch, still pay handsome dividends.
"Part of it is people perhaps realizing they were overly cautious about the prospects for financial companies and the energy sector," Raschkowan said.
"The sentiment had gotten very negative towards the banks. You've seen a bit of a recovery today in the banks and other financial stocks. People are saying, 'Maybe things in Canada aren't that bad.'"
In New York, the Dow Jones industrials was up 56.22 points at 17,958.73, the Nasdaq rose 23.75 points to 4,974.57 and the S&P 500 closed up 9.28 points to 2,091.18.
Over the coming weeks, traders will be looking to earnings reports from large U.S. companies to gauge how much the stronger U.S. dollar is hurting exports.
Alcoa delivered an earnings report after markets closed Wednesday that beat on earnings but fell short on revenue.
Drugstore operator Walgreens Boots Alliance Inc. also beat expectations on profit but disappointed on revenue when it reported its earnings Thursday.
"While the earnings were better than expected, the revenues were soft," Raschkowan said. "Revenue growth was less than expected. And so that's causing people to be concerned again about the impact of the stronger U.S. dollar on U.S. companies, and also on the pace of growth."
Meanwhile, Bed Bath & Beyond posted earnings that were well below analyst expectations and also included a "sombre" outlook for profits amid increasing competition from online merchants.
On the commodity markets, the May crude contract was up 37 cents at US$50.79 a barrel, likely due to concerns that Iran will not be able to reach a deal with world powers over its nuclear program. A deal could result in a boost to Iranian oil exports, adding to the glut of global supply.
The June gold contract dropped $9.50 to US$1,193.60 an ounce.
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