TORONTO -- The Toronto stock market drifted around the unchanged mark mid-afternoon Friday as buying sentiment was blunted by growing concerns that the U.S. Federal Reserve is set to start reducing its monetary stimulus.

The S&P/TSX composite index was 4.62 points higher at 13,119.01.

The Canadian dollar shook off early losses to advance 0.36 of a cent to 94.34 cents US.

U.S. indexes registered modest gains after three days of losses as the Dow Jones industrials edged 37.09 points higher to 15,776.52, the Nasdaq added 8.45 points to 4,006.85 and the S&P 500 index gained 2.88 points to 1,778.38.

Expectations about the Fed tapering its US$85 billion a month of bond purchases have changed over the last month. Previously markets largely expected that the U.S. central bank would hold off until March when incoming chair Janet Yellen was settled in the new job.

But a string of strong data last week, capped by a solid employment report for November, has raised concerns that the Fed could act as soon as next week when the Federal Open Market Committee meets Dec. 17-18.

A better than expected retail sales report for November and the passage of a budget agreement in the U.S. Congress further served to raise expectations.

But that doesn't mean everyone is convinced the Fed is set to move next week.

Wes Mills, chief investment officer for Scotia Asset Management PM Advisor Services, thinks that the Fed will wait until March when Yellen has had some time on the job and sees more indications of an improving economy.

"You're just coming back from this government shutdown and all that," he said. "We haven't seen two or three months strung together that we can really point to with solid conviction that this hasn't been influenced by something else."

Mills added that the uncertainty about the Fed will continue to be an overhang if it doesn't move next week.

But he believes "the market will very quickly factor that in and drive on and start to focus on earnings more because . . . now if we're going to go higher we need earnings."

The U.S. stimulus has lifted stocks over the past few years and its potential reduction has jolted markets since May when outgoing Fed chair Ben Bernanke first mentioned the possibility of tapering. However, any cutback in asset purchases would be gradual and is expected to be accompanied by a renewed commitment by the Fed to keep interest rates low.

The consumer discretionary sector was the biggest advancer, up 0.7 per cent with retailers Reitmans (TSX:RET.A) ahead 21 cents to $6.17 while Dollarama (TSX:DOL) gained $1.09 to $85.59.

The much battered gold sector, down 50 per cent for the year, was well off early levels, up just 0.1 per cent as February bullion gained $9.70 to US$1,234.60 an ounce. Barrick Gold (TSX:ABX) rose 18 cents to C$17.66.

Telecoms were weak after the CRTC announced it will look at wholesale rates charged to small wireless firms by the big players including Rogers (TSX:RCI.B), Bell (TSX:BCE) and Telus (TSX:T). The federal telecom regulator wants to know if big players are putting these small players at an unfair disadvantage with the wholesale roaming rates they charge. Rogers shed 44 cents to $47.20.

The energy sector was off 0.14 per cent as January crude on the New York Mercantile Exchange declined 74 cents to US$96.76 a barrel. Suncor Energy (TSX:SU) shed 39 cents to C$35.61.

The base metals sector was also slightly lower even as March copper was up two cents at US$3.31 a pound.

Traders also digested comments by Chinese leaders that the world's second-largest economy faces "downward pressure" and have called for boldness in carrying out promised reforms aimed at reviving slowing growth.

In a report following an annual planning meeting, Communist party leaders said Friday that the country faces problems including excess production capacity in some industries and environmental degradation.