North American stocks closed sharply higher Tuesday, as higher commodity prices boosted the Toronto market, and merger speculation moved the New York exchanges.

The S&P/TSX composite index gained 131.22 points, or 1.01%, to 13,171.22, largely reversing the losses of the two previous sessions.

Eight of the 10 TSX main groups were up, with the energy sector gaining 1.39%.

Light, sweet crude rose $1.25 to close at US$59.06 a barrel.

Imperial Oil Ltd. gained 55¢, or 1.33%, to $42.05.

The materials sector shot up 2.09%, while gold gained 0.61%. Gold futures moved up $1.20 to close at US$668.50 an ounce.

Alcan Inc. moved up $2.65, or 4.33%, to $63.90.

The information technology group gained 0.70%.

Nortel Networks gained $1.22, or 3.57%, to $35.39.

The S&P TSX Venture Exchange closed up 2.98, or 0.10%, to 3,007.37.

In New York, a Times of London news report suggesting Alcoa was a possible takeover target gave the markets positive momentum.

The Dow Jones industrial average gained 102.30 points to 12,654.85, the S&P 500 rose 10.89 to 1,444.26, while the Nasdaq composite index gained 9.5 to 2,459.88.