TORONTO - The Toronto stock market closed slightly higher Friday as oil prices resumed their climb amid investor optimism that the recession is over, at least in Canada.

The S&P/TSX composite index edged up 12.22 points to finish the week at 10,687.90. The index was up three per cent on the week, its second positive week in a row.

Investors are in "wait-and-see mode" following a string of better-than-expected U.S. earnings reports and a prediction from the Bank of Canada that the economy will grow this quarter for the first time in nine months, said Kate Warne, Canadian market strategist at Edward Jones in St. Louis.

The index is only 26 points away from passing the 10,714 mark, its highest level for 2009.

However, the market has now factored in the fact that the economy is improving and there will be more volatility ahead, said John Johnston, chief strategist for the Harbour Group at RBC Dominion Securities.

"When government officials start talking about the end of the recession, it's an indication that it's very well discounted amongst investors," Johnston said.

"We've had a nice long streak of gains in the marketplace, but the market never goes in one direction for that long."

The Nasdaq composite index fell 7.64 points to 1,965.96, weighed by shares in Microsoft and Amazon, which fell $7.38 or seven per cent to US$86.49.

The Dow Jones industrial average edged up 23.95 points to 9,093.24, while the S&P 500 index added 2.97 points to 979.26.

The loonie continued its upward flight Friday, adding 0.30 cent to 92.34 cents U.S, while the September crude contract on the New York Mercantile Exchange gained 89 cents to US$68.05 a barrel.

The TSX Venture Exchange moved up 5.63 points to 1,143.42.

In Toronto, the financial sector added 1.8 per cent while the base metals sector gained 0.7 per cent.

The gold sector was 0.7 per cent lower as the August bullion contract on the Nymex lost $1.70 to US$953.10.

In corporate news, Loblaw Co. Ltd. (TSX:L) shares fell 70 cents or two per cent to $35.05 after reporting an uptick in sales helped boost its earnings by 38 per cent in the second quarter.

The grocery store giant also announced it will pay $225 million for T&T Supermarket Inc., which is described as Canada's largest Asian food retailer.

And Western Canadian Coal Corp. (TSX:WTN) said it has arranged a $52.1-million bought-deal financing, with underwriters agreeing to buy at least 19.3 million of the company's common shares. The news caused its stock to tumble 21 cents or seven per cent to $2.73.

American markets were mixed as investors reacted to disappointing earnings from Microsoft, Amazon and American Express Co.

Amex said its profit fell 48 per cent to US$337 million on lower card use and slow repayment from its customers while Amazon's earnings were down 10 per cent to US$142 million.

Microsoft said its profit in the latest quarter plunged 29 per cent to US$3.05 billion because of weak computer sales, sending its shares plunging $2.11 or eight per cent to US$23.45.