North American markets stop big slide as oil, loonie gain ground

North American stock markets pulled back from their recent significant losses Wednesday, as oil prices gained ground and the U.S. Federal Reserve said it was leaving its key interest rate unchanged.

The Toronto Stock Exchange's S&P/TSX composite index edged back 3.84 points to 15,951.67, after losing about 284 points in the previous two trading sessions.

In New York, the Dow Jones industrial average was up 72.50 points to 26,149.39. The S&P 500 index added 1.38 points to 2,823.81 and the Nasdaq composite index advanced 9.00 points to 7,411.48.

On Tuesday, Wall Street had slumped to its worst loss since August.

"Stocks are generally flat on the day," said Todd Mattina, a chief economist with Mackenzie Investments. "But that's good news in the sense that global markets seem to be stabilizing after the recent two-day sell-off.

"So perhaps some stability after a recent period of volatility is welcome."

Investors were little surprised that the Fed left its benchmark interest rate unchanged Wednesday in a still-low range of 1.25 per cent to 1.5 per cent. But the U.S. central bank signalled that it expects to resume raising rates gradually to reflect an improving, healthy job market and economy.

In a statement, the Fed also said that it expects inflation to finally pick up this year and to stabilize around the Fed's target level of two per cent. The central bank has previously signalled that it could raise interest rates three times this year.

"The odds now of the next Fed rate hike in March is almost 100 per cent based on Fed funds futures," Mattina noted.

In currency markets, the Canadian dollar closed at an average trading value of 81.35 cents US, up 0.23 of a U.S. cent.

"This has been a day of broad-based U.S. dollar weakness against many major currencies, so the loonie has participated in that as well," said Mattina.

On the energy front, oil prices reversed an early slide Wednesday, as the March crude contract rose 23 cents to US$64.73 per barrel.

Elsewhere in commodities, the March natural gas contract was down 20 cents to US$3.00 per mmBTU. The April gold contract was up US$3.10 to US$1,343.10 an ounce and the March copper contract added one cent to US$3.20 a pound.