(Adds investor comment, updates prices to close)
By Alastair Sharp
TORONTO, Dec 18 (Reuters) - Canada's main stock index rose on Thursday, with energy stocks bucking weak oil prices as investors returned to riskier assets after an upbeat assessment of the U.S. economy by the Federal Reserve.
Trading was volatile, however, with the index at one point turning negative after rising as much as 1.6 percent and telecom stocks exerting downward pressure.
"We're getting volatility from two fronts, from everything energy-related and from fixed income," said Paul Taylor, chief investment officer for BMO Asset Management.
The Fed's promise to take a "patient" approach to hiking interest rates, while adding a note of clarity on when it might raise rates, was seen as broadly positive for equities.
Meanwhile crude prices resumed their slide after a short-covering rally on Wednesday, but Canada's energy sector did not follow suit after weeks of downward pressure.
"On the energy side, for those who are not faint of heart, there are some real opportunities if your time horizon extends beyond the next six to twelve months," Taylor said.
He said oil could fall into the $35-$40 a barrel range in the near term, but should recover to $75-$95 range a year out.
Among oil and gas shares, Canadian Oil Sands Ltd jumped 10.4 percent to C$10.75, Cenovus Energy Inc gained 4.1 percent to C$22.76, and MEG Energy Corp rose 10.8 percent to C$18.34.
That trio is among producers scaling back 2015 spending plans or reducing dividends in response to tumbling oil prices.
"This is giving people reassurance that they are paying more attention to the balance sheet," said Michael Simpson, senior portfolio manager at Sentry Select Capital.
The Toronto Stock Exchange's S&P/TSX composite index ended up 132.87 points, or 0.93 percent, at 14,346.75 for its third straight day of gains after a string of losses.
Shares in convenience store operator Alimentation Couche-Tard Inc surged 8.6 percent to C$46.21 after it said it would buy smaller U.S. rival Pantry Inc for about $861 million to boost its presence in the southeastern and Gulf Coast regions of the United States.
Telecom stocks were notably absent from the rally, with investors cautious on the sector ahead of a federal government wireless-industry policy announcement later in the day.
Telus Corp slipped 1.2 percent to C$42.15 and Manitoba Telecom Services fell 1.1 percent to C$26.85.
Additional reporting by Solarina Ho; diting by Meredith Mazzilli, Chizu Nomiyama; and Peter Galloway