TORONTO -- The Toronto stock market was higher for a third day Thursday as investors continued to pick over stocks crushed during the course of a severe sell-off sparked by falling oil prices.

But traders hoping to see a bottom to falling stocks and crude prices remain cautious. After an initial surge of more than 200 points, the S&P/TSX settled back to a more modest gain, up 82.81 points to 14,296.69 at mid-afternoon.

The Canadian dollar was up 0.3 of a cent at 86.22 cents US.

New York markets were sharply higher as traders felt more confident about the pace of future interest rate hikes by the U.S. Federal Reserve. The central bank said Wednesday that it will be "patient" in deciding when to hike rates, with chair Janet Yellen adding that she foresaw no raise in the first quarter of 2015.

The Dow Jones industrials jumped 287.83 to 17,644.7, the Nasdaq gained 84.01 points to 4,728.32 and the S&P 500 index rose 32.65 points to 2,045.54.

The latest word from the Fed on rate hikes helped send North American markets sharply higher Wednesday, particularly on the TSX as bargain hunters moved to snap up stocks beaten down in a steep recent sell-off triggered by plunging oil prices. At its worst earlier this week, the TSX was less than 100 points away from where it started at the beginning of the year.

Some analysts suggested the more positive tone on markets this week is partly due to investors realizing that lower oil prices are a big positive for a largely depressed global economy.

"Six months from now, you should start to see the benefits of lower oil prices and you`ll start to see growth pick up globally," said Norman Raschkowan, senior partner at Sage Road Advisers.

"It`s going to be very positive for Europe, which had been skirting with deflation and concerns about falling back into recession. This should put an end to that speculation."

The energy sector edged up 0.25 per cent Thursday on top of a rise of about 15 per cent over the previous two sessions as oil and gas stocks recovered from a major decline tied to a big drop in the price of crude. On Thursday, the January crude contract in New York was down $1.73 to US$54.74 a barrel after having edged higher the previous two days. Canadian Oil Sands (TSX:COS) was ahead 81 cents or 8.3 per cent at C$10.55.

Gains also spread to other areas, such as financials, which added 0.1 per cent following an advance of about 2.5 per cent over Tuesday and Wednesday. The sector had sold off on concerns about the impact of falling oil prices on the Canadian economy and the exposure of banks to high-cost producers that took on debt to finance expansion.

The gold sector climbed 2.5 per cent Thursday as February bullion inched up 30 cents to US$1,194.80.

March copper was off two cents at US$2.85 a pound and the base metals sector was flat.

The telecom sector was only decliner, down 0.8 per cent.

Major acquisition activity in the consumer staples space also helped lift the TSX.

Alimentation Couche-Tard Inc. (TSX:ATD.B) has a friendly deal to buy The Pantry Inc., which will add more than 1,500 locations to the Quebec-based company's U.S. network of convenience stores and fuel stops. The deal values The Pantry at US$1.7 billion, with Couche-Tard paying US$36.75 cash per share. Couche-Tard stock rose $3.34 or 7.9 per cent to C$45.88.