TORONTO - The Toronto stock market eked out a small gain Friday as blue chips such as financials and telecoms cancelled out losses from resource companies, which backed off on worries that the U.S. economy continues to slow.

The S&P/TSX composite index rose 11.89 points to 11,722.07 as investors continued to react to figures released Thursday which showed an unexpected rise in weekly U.S. jobless claims to half a million and a big drop in manufacturing activity in the Philadelphia region.

Analysts believe the most worrisome sign came from the U.S. jobless claims data, which suggests American employers continued to cut jobs.

"Absolutely, that is the only indicator that matters right now, is that of jobs," said Paul Taylor, chief investment officer at BMO Harris Private Banking.

"For the fiscal stimulus-led recovery to morph into an organic sustainable economic recovery, you have to create jobs, because people working can afford to buy cars and big-screen TVs and iPads and things like that. If you don't have a job, everything comes unglued."

The TSX Venture Exchange gained 6.27 points to 1,479.62.

Investors also took in data showing a rise in inflation during July.

Statistics Canada reported that the country's annual inflation rate rose to 1.8 per cent in July, up from one per cent. The agency said new harmonized sales taxes in Ontario and British Columbia and a higher HST rate in Nova Scotia affected consumer prices in July.

The Canadian dollar was down sharply for a second day amid a stronger U.S. dollar, losing 0.88 of a cent to 95.35 cents US.

TSX advances were led by the financials group as investors prepare to receive quarterly earnings next week from the big Canadian banks. Four banks report during the week -- Bank of Montreal (TSX:BMO), CIBC (TSX:CM), National Bank (TSX:NA) and Royal Bank (TSX:RY).

National Bank was ahead 89 cents to $57.24 while Sun Life Financial (TSX:SLF) climbed 52 cents to $25.67.

Telecoms also contributed to the showing as Telus Corp. (TSX:T) rose 57 cents to $42.61.

The energy sector was down 0.6 per cent as worries about the pace of the U.S. economic recovery helped push the September crude contract on the New York Mercantile Exchange down 97 cents to US$73.46 a barrel. Oil declined just shy of $1 Thursday as data earlier in the week showed oil supplies fell far less than expected last week.

Canadian Natural Resources (TSX:CNQ) lost 26 cents to C$33.75 and Suncor Energy (TSX:SU) shed 31 cents to $32.68 after it said it is experiencing an outage at one of its hydrogen reformer units at the oil sands base plant in Fort McMurray, Alta. Canada's biggest integrated energy company reported Friday that an assessment of the unit is underway to determine the cause of the outage and timing for when it will restart.

The base metals sector led decliners, down 1.53 per cent as demand worries weakened metal prices with the September copper contract in New York down three cents to US$3.29 a pound. First Quantum Minerals (TSX:FM) dropped $5.69 to C$56.15 while Lundin Mining (TSX:LUN) gained 14 cents to $4.12.

The gold sector was little changed as the December gold contract in New York was off $7.80 to US$1,227.60 an ounce.

Research In Motion Ltd. (TSX:RIM) was also a drag on the TSX as the BlackBerry maker fell $1.48 or 2.8 per cent to $51. RIM's stock has plunged more than 13 per cent this month as several countries put pressure on the company to allow access to email -- or risk having services shut down. The stock also fell Friday after Morgan Stanley analyst Ehud Gelblum reduced his rating on the stock to underweight from overweight on concerns about slipping market share.

New York markets moved mainly lower as the Dow Jones industrial average closed down 57.59 points to 10,213.62.

The Nasdaq composite index edged up 0.81 of a point to 2,179.76 while the S&P 500 index dropped 3.94 points to 1,071.69.

North American markets put in a mixed performance this week. The TSX gained just over 190 points or 1.7 per cent cent this week, but that was largely on the back of the resource sector as PotashCorp (TSX:POT) shares surged in the wake of a US$38.6-billion hostile takeover bid by Australian resource giant BHP Billiton. The base metals sector gained 1.74 per cent this week on hopes that other companies could be ripe for a takeover with a fat share price premium.

On Friday, PotashCorp said its board of directors will review formal documents filed by BHP Billiton related to its cash takeover offer, and make a recommendation to its shareholders. But until then, the Saskatchewan-based company said Friday it advises shareholders not to take any action on the bid.

The move comes after BHP Billiton (NYSE:BHP) said Wednesday it would take its offer directly to PotashCorp shareholders. Potash shares moved up $2.20 to $157.06.

The Dow industrials declined 0.86 per cent this week.

Elsewhere, Dell Inc. reported a better-than-expected profit Thursday, due largely to increased technology spending by businesses. However, sales in its consumer personal computer division were flat compared with the same quarter last year, further evidence that shoppers are hesitant to buy new goods. Dell shares inched up three cents to US$12.07.

Hewlett-Packard Co. reported quarterly results that were in line with preliminary results it released earlier in the month. Its profit rose six per cent. Unlike Dell, it had growth in its personal computer sales but its shares were still down 93 cents to US$39.83.

Calgary-based farm products firm Agrium Inc. said Thursday it has entered into a definitive agreement to acquire Australian grain marketer AWB Ltd. for $1.1 billion, pushing out a competing bidder. Agrium (TSX:AGU) said AWB's board has deemed its bid superior to an earlier takeover proposal from Australian grain handler GrainCorp Ltd. That offer was reportedly worth around $829 million. Agrium shares advanced $1.02 to C$72.03.