CANADA STOCKS-Railways and financials nudge TSX higher in quiet trade

* Index up 7.85 points, or 0.05 percent, at 15,214.96
    * Trading muted by U.S. holiday

 (Adds investor comment, updates prices to close)
    By Alastair Sharp
    TORONTO, July 4 (Reuters) - Canada's main stock index closed
flat on Friday, but not far from its record high, as bank,
insurer and railroad shares benefited from the likelihood of
stronger economic growth in North America.
    Rising government debt yields also helped the financial
    With Wall Street closed for the U.S. Independence Day
holiday, Canadian investors showed little interest in making any
dramatic moves following some blockbuster economic data and
central bank news this week that had pushed the Toronto Stock
Exchange' benchmark index to record highs. The index was last at
these levels in 2008, before the global financial crisis. 
    Thursday's U.S. jobs numbers for June smashed forecasts and
effectively dispelled fears about the health of the economy 
after a weather-hit start to the year. 
    Also, U.S. Federal Reserve Chair Janet Yellen took comfort
in indications of economic recovery while steering clear of
rate-hike talk. 
    "All the signs that are emanating out of the Fed in the
States are that things are starting to get better," said Rick
Hutcheon, president at RKH Investments. "Yellen has certainly
given every indication that she's in no immediate hurry to raise
interest rates."
    That mix of still-low borrowing costs and continued ascent
in government debt yields should bode well for Canada's
financial shares, Hutcheon said.
    Over the longer term, life insurance companies may become
more attractive than banks as interest rate rises eventually
take hold, he said.
    Insurer Manulife Financial Corp gave one of the
single biggest boosts to the index on Friday, adding 1.2 percent
to C$21.82. Toronto-Dominion Bank gained 0.3 percent to
C$55.28 and Bank of Nova Scotia was up 0.2 percent at
    Canadian Pacific Railway Ltd jumped 1.5 percent to
C$198.95, while rival Canadian National Railway gained
0.6 percent to C$70.02. Both stocks have gained in value as oil
is increasingly sent across the continent by rail.
    "The railroads are pretty much a coincident indicator. That
is to say, if you get rising GDP growth, then that very quickly
gets reflected in freight volumes," said Bob Gorman, chief
portfolio strategist at TD Waterhouse.
    The Toronto Stock Exchange's S&P/TSX composite index
 closed up 7.85 points, or 0.05 percent, at 15,214.96.
    That was just short of the index's record high, 15,256.36,
hit on Thursday.
    "It's been a long time since we set that record, so we're
really just playing catch-up here," TD's Gorman said.
    ($1=$1.06 Canadian)

 (Editing by Chris Reese; and Peter Galloway)