Stock markets further mended from last week's selloff Friday as pleasing U.S. inflation data and lower bond yields pushed Toronto and New York indexes to strong gains for a third session. Toronto's S&P/TSX composite index closed up 135.42 points to 14,137.41, just a handful of points away from the most recent record high reached June 4, the day before the selloff began on worries about interest rates. The Toronto market gained 338.91 points or 2.5 per cent this week, sending the TSX up 9.5 per cent year to date. The TSX Venture Exchange gained 39.92 points to 3,202.87. The Canadian dollar moved up 0.04 of a cent (U.S.) to 93.61 cents. In New York, the Dow Jones industrial average finished up 85.76 points to 13,639.48 for a gain of 215.48 points or 1.6 per cent this week. The blue chip index is up 9.4 per cent year to date. Stocks got off to a strong start after the U.S. Labour Department said headline consumer prices increased 0.7 per cent in May because of surging gasoline prices, but core inflation excluding energy and food came in at 0.1 per cent, less than the 0.2 per cent reading economists were expecting. The data's indication that rising energy costs have not infected other parts of the economy makes it less likely that the U.S. Federal Reserve will hike interest rates. Rate worries and higher bond yields had provoked a week of stock-market losses, but shares have been on the mend since the yield on the benchmark 10-year U.S. Treasury bond started easing from early Wednesday's five-year high of over 5.3 per cent. The 10-year Treasury's yield was 5.17 per cent Friday afternoon. "Rates may go up but they're not going substantially higher," said Paul Harris, portfolio manager at Avenue Investment Management. "There's still lots of liquidity out there because interest rates are still relatively low. All the fundamental issues that were pushing, causing stocks to go up, are still there. Valuations still remain very cheap." The Nasdaq composite index moved ahead 27.3 points to 2,626.71 after earlier touching 2,630, a level unseen since February 2001, for a gain of 2 per cent this week. The S&P 500 index rose 9.94 to 1,532.91.