TORONTO - The Toronto stock market closed higher for a fifth session in a row, wrapping up a week of strong gains sparked by good earnings news that gave fresh life to the spring rally.

The main S&P/TSX composite index advanced 65 points to 10,369.42, led by sharp gains in energy and mining stocks.

The TSX surged 622 points or 6.38 per cent this week as a series of better than expected earnings reports from the likes of financial giant Goldman Sachs and chip maker Intel Corp. raised hopes for an economic recovery.

Companies have largely beat earnings expectations but analysts are worried about growth in revenue, noting that much has occurred through cost-cutting.

"You can't continue to keep cutting costs, eventually you start slicing into bone or muscle," said Pat McHugh, senior portfolio manager at MFC Global Investment Management.

"You can have a company that grows revenue at say X per cent per year and its earnings per share grow at greater than X per cent. That is not a sustainable trend. You cannot have bottom line on a long-term basis grow faster than top line and that's what we're seeing right now."

This week's advance more than wiped out last week's 5.2 per cent decline, when investors were feeling the spring rally had run out of momentum on pessimism about a turnaround.

It leaves the TSX up 37 per cent from the lows of March 9.

Meanwhile, the Canadian dollar was up 0.09 of a cent to 89.6 cents US as Statistics Canada reported that consumer prices fell by 0.3 per cent in June from a year ago, the biggest drop since 1955.

The decline was largely due to a huge retreat in gasoline prices. Prices rose 0.3 per cent in June -- largely because of a rise in gasoline prices from May to last month.

"Outside of the deep dive in energy, there has actually been precious little major movement in underlying price trends, with core inflation continuing to surprise the Bank of Canada to the high side," commented BMO Capital Markets deputy chief economist Doug Porter.

"The resiliency in core inflation reinforces the point that deflation is not a major concern for Canada at this point -- the negative headline inflation readings look to be a passing fad."

There was glum news from a widely watched gauge of future economic activity.

Statistics Canada said its leading indicator fell by 0.1 per cent in June, as housing and the stock market posted gains but all manufacturing sectors were down.

The agency said there was one positive sign for exports, an increase in the leading indicator for the United States, its first advance since the credit crisis began in August 2007.

The TSX energy sector was the major advancer, up 1.73 per cent as the August crude contract in New York moved $1.54 higher to US$63.56 a barrel. Suncor Inc. (TSX:SU) gained $1.16 to $33.95.

The TSX also found support from the base metals sector, up three per cent as the September copper contract moved up 3.35 cents to US$2.423 an ounce. Teck Resources (TSX:TCK.B) gained $1.02 to $23.42.

The TSX Venture Exchange moved 2.18 points lower to 1,095.62.

New York markets were higher at the end of a strong week with the Dow Jones industrials ahead 32.12 points to 8,743.94. The Dow gained 597 points or 7.3 per cent this week.

Investors were encouraged by economic data showing that U.S. housing starts unexpectedly rose 3.6 per cent to 582,000 annualized units in June. The gain followed a 17.3 per cent surge in May.

Starts are down 46 per cent from a year ago but are at their highest level since November and well above April's all-time low of 479,000.

The Nasdaq composite index was up 1.58 points to 1,886.61 and the S&P 500 down 0.36 of a point to 940.38.

On Friday, General Electric was the latest major company to report better-than-expected second-quarter profit. But GE's revenue fell short of expectations and profit was still down 49 per cent from last year to US$2.6 billion amid continued woes at its finance unit and ongoing weakness in its big industrial units. GE shares fell 71 cents to US$11.69.

Bank of America's profit fell from a year earlier as losses from delinquent loans continued to climb. The bank said it recorded a $13.4 billion provision for loan losses during the second quarter as consumers struggled with debt amid rising unemployment. Its shares declined 32 cents to US$12.85.

And Citigroup surprised analysts who had forecast a loss by turning in a profit of $3 billion in the second quarter. But the gain was largely due to a huge one-time gain on the sale of its Smith Barney brokerage. Its shares slipped four cents to US$2.99.

The August bullion contract on the Nymex gained $2.10 to US$937.50 an ounce, sending the gold sector up one per cent. Goldcorp. Inc. (TSX:G) climbed 63 cents to $41.04.

In other corporate news, Canwest Global Communications Corp. (TSX:CGS) has been given another extension from creditors to reach a recapitalization agreement. Friday's deadline was extended by two weeks to July 31. The shares closed unchanged at 10.5 cents on the TSX.

Canadian Pacific Railway Ltd. (TSX:CP) and about 1,100 of its workers represented by the United Steelworkers have reached a tentative three-year contract settlement. Its shares were off 72 cents to $41.21.

Canadian National Railways (TSX:CNR) was up 17 cents to $48.88 ahead of earnings coming out on Monday.

Bonavista Energy Trust (TSX:BNP.UN) is buying some of EnCana Corp.'s (TSX:ECA) central Alberta natural gas properties for $694 million. Bonavista units lost 95 cents to $16.85 while EnCana gained 78 cents to $56.59.

Shares of Canadian frozen-treat maker CoolBrands International Inc. (TSX: COB) jumped Friday after the Toronto-area company announced a New York state judge had dismissed several complaints filed against it by an investment fund. Its shares gained five cents to 72 cents.