NEW YORK – That screeching sound you heard in May? That was the stock market.

While the month ended with four days of gains in most of the indexes, concerns that high gas prices, tornadoes and flooding in the South, the post-natural disaster slowdown in Japan and a growing debt crisis in Europe sent the Standard and Poor’s 500 stock index down 1.4 percent in May. That decline followed a 2.85 percent gain in April, which followed gains that set the fastest pace in the first quarter since 1998. Before this month, stocks were boosted by higher corporate earnings, increased business spending and a global economic expansion.

May was the first down month for the S&P since August 2010.

Other risky assets also saw declines in May, following a year of increases. The prices of commodities like oil, cattle and coffee fell by an average of 7 percent. Meanwhile, Treasury bond prices, which tend to rise when investors fear that the economy is slowing, rose to near their highest level of the year.

For Tuesday, the stock market ended higher, on signs that Germany might drop its demands for an early rescheduling of Greek bonds, paving the way for a deal that could prevent Greece from defaulting on its debt. The S&P index gained 14.10, or 1.1 percent, to 1,345.20. The Dow Jones industrial average added 128.21, or 1 percent, to 12,569.79. And the Nasdaq composite rose 38.44, or 1.4 percent, to 2,835.30.

These gains came in spite of another grim report on the U.S. housing market. Home prices in in 12 of the 20 cities tracked by the Standard & Poor’s/Case-Shiller index dropped in March to the lowest levels since the housing bubble popped in 2006. “Home prices continue on their downward spiral with no relief in sight,” said David Blitzer, chairman of the index committee at S&P Indices.

Oliver Pursche, president of Gary Goldberg Financial Services, said the report didn’t hurt investors’ confidence much because their expectations for the U.S. housing market were already low.

“There’s no shock factor there,” Pursche said. “We knew it was going to be bad, and it is.”

Even so, the month of May was an unhappy one for stock holders for the second year in a row — although the losses weren’t nearly as bad as they were last year. Just like 2010, when the S&P index lost 8 percent in May, Greece said that it will need outside help from other European Union countries to meet its debt payments. And in the U.S., the domestic economy sputtered again. Thirteen economic indicators, ranging from personal spending to manufacturing orders, were weaker than economists had predicted, a sign investors and analysts say indicates that high gas prices are slowing growth more than anticipated.

Some investors believe that May was merely a short-term dip_and given the news of the month, markets could have seen bigger declines. “(Stocks) held up reasonably well this month, given all that the market had to digest in terms of worries,” said David Kelly, chief market strategist at J.P. Morgan Funds.

Kelly and others say that the lingering good feelings from a strong earnings season, where the average company beat Wall Street’s quarterly earnings expectations by more than 6 percent, was part of the reason the broad market didn’t decline further. Another reason, Kelly says is that the belief “in the market that any of the slowdown in the economy is relatively temporarily.”

One-time factors like bad weather and problems with getting parts from Japan, along with a sharp upturn in investments by private companies, all suggest that the economy will continue to grow this year despite recent signs of weakness, Kelly said.

The few industries that performed well in May were so-called defensive ones like health care and utilities that have stable earnings because the items they sell are not luxuries. Consumer staples — companies like PepsiCo and Costco Wholesale that sell everyday items like soda and diapers — rose nearly 2.5 percent, the most out of any group.

June should provide some answers as to whether the economy truly is slowing down. Economists expect that Friday’s jobs report will show that the unemployment rate fell to 8.9 percent in May from 9.0 percent in April. And at the end of the month, the Federal Reserve will end its bond-buying stimulus program, QE2. The program has kept interest rates low, which makes owning riskier assets, like stocks or commodities, more attractive.

Some investors believe that the end of the Fed’s stimulus program is already reflected in stock prices. “The market looks ahead six to nine months, so if the market thought the end of QE2 was going to be harmful we would have felt it already,” said Peter Maris, the founder of Resource Financial Group, a financial adviser in Wilmette, Ill.

The S&P index has risen 7 percent this year, before dividends. At this point would take an 87.56 point drop for it to turn negative for the year. The Dow would need to drop 992.28 points to erase its 8.6 percent gain for the year.

NEW YORK (Reuters) – Stocks rose on Friday on strength from Caterpillar and other industrials, lifting the Dow and Nasdaq to their best monthly performance since December.

Heavy machinery manufacturer Caterpillar Inc (CAT.N) led the way after reporting a fivefold increase in profit and raising its full-year forecast.

“Now that earnings are coming in, the investment community is telling you that once some of these negative issues subside — sovereign debt, Middle Eastern tensions — this market is going to rip,” said Jason Weisberg, managing director at Seaport Securities Corp.

The blue-chip Dow average climbed 4 percent for the month while the S&P 500 rose 2.8 percent and the Nasdaq gained 3.3 percent.

“You take that entire mixture and the market took all of that simultaneously — they weren’t separate events — they were all concurrent. And we couldn’t blast the market below 12,000,” Weisberg said.

Concerns that the market would pull back after earnings are somewhat offset by favorable corporate outlooks and expectations for continued easy money policies from the Federal Reserve that have fueled runs in speculative assets.

April’s gains were limited by slides in Microsoft Corp (MSFT.O), the Nasdaq’s most heavily traded stock, and BlackBerry maker Research in Motion (RIM.TO)(RIMM.O).

Caterpillar gave the top boost to the Dow, advancing 2.5 percent to $115.41, after reaching an all-time high of $116.25 during the session. The S&P industrial sector index (.GSPI) added 0.3 percent. Caterpillar is up more than 20 percent so far this year, along with fellow industrial Boeing Co (BA.N).

Microsoft dropped 3 percent to $25.92 and was the biggest drag on the blue-chip Dow after it reported a drop in quarterly sales of its Windows software, mirroring a recent downturn in demand for personal computers. U.S.-listed shares of Research in Motion tumbled 14 percent to $48.65 after the BlackBerry maker cut its first-quarter forecasts.

The Dow Jones industrial average (.DJI) gained 47.23 points, or 0.37 percent, to 12,810.54. The Standard & Poor’s 500 Index (.SPX) rose 3.13 points, or 0.23 percent, to 1,363.61. The Nasdaq Composite Index (.IXIC) edged up 1.01 points, or 0.04 percent, to 2,873.54.

For the week, the Dow rose 2.4 percent, the S&P 500 gained 2 percent and the Nasdaq advanced 1.9 percent.

Merck & Co Inc (MRK.N) reported higher-than-expected quarterly earnings, fueled by strong sales of drugs for diabetes, asthma and rheumatoid arthritis, while Chevron Corp (CVX.N) reported a jump in earnings as oil prices surged.

Shares of Merck rose 0.45 percent to $35.95 while Chevron added 0.6 percent to $109.44. Both stocks are Dow components.

Robust corporate earnings, ample liquidity from the Federal Reserve and the prospect of ultra-low interest rates for the rest of the year have sparked bullishness, pushing the Nasdaq to a 10-year high and lifting the S&P 500 more than 8 percent this year. The major U.S. stock indexes also hit new yearly highs during the week.

The rebalancing by Nasdaq OMX (NDAQ.O) of its benchmark Nasdaq 100 index (.NDX) will take place on May 2, in which the exchange said it will cut the weight of 82 securities to bring them more in line with their market capitalizations. Apple Inc (AAPL.O) will see its weighting dropped to 12.3 percent from 20.3 percent.

With May, the market is heading into a typically weak period. May has been the fourth-weakest month for the Dow, averaging a 0.2 percent gain since 1950, according to the Stock Trader’s Almanac. It also normally marks the start of the worst six months of the year for the industrials.

Volume was light, with about 7.17 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq, below the daily average of 7.72 billion.

Advancing stocks outnumbered declining ones on the NYSE by 1,953 to 1,028, while on the Nasdaq, advancers beat decliners 1,417 to 1,146.

(Reporting by Chuck Mikolajczak; Editing by Jan Paschal)

NEW YORK (Reuters) – U.S. stocks got a lift on Friday from Caterpillar and other U.S. industrials’ shares, putting the Dow in line for its best monthly performance since December.

Heavy machinery manufacturer Caterpillar Inc (CAT.N) climbed after reporting a fivefold increase in quarterly profit and raising its full-year forecast.

“This whole rally we’ve seen has been earnings driven,” said Tim Ghriskey, chief investment officer of Solaris Asset Management in Bedford Hills, New York.

“The corporate earnings and corporate revenues are much stronger than the economic data would indicate and that is why we keep marching higher here.”

The blue-chip Dow average was up 4.1 percent for the month while the S&P 500 has risen 2.8 percent and the Nasdaq has gained 3.3 percent. The Nasdaq was also heading for its best month of the year, while the S&P 500 was aiming for its best month since February.

April’s gains, however, were limited by slides in Microsoft Corp (MSFT.O), the Nasdaq index’s most heavily traded stock, and BlackBerry maker Research in Motion (RIM.TO)(RIMM.O).

Caterpillar gave the top boost to the Dow, advancing 2.8 percent to $115.83, after reaching an all-time high of $116.25 during the session. The S&P industrial sector index (.GSPI) gained 0.4 percent. Caterpillar is up more than 20 percent so far this year, along with fellow industrial Boeing Co (BA.N).

Microsoft dropped 4.5 percent to $25.51 and was the biggest drag on the blue-chip Dow after it reported a drop in quarterly sales of its Windows software, mirroring a recent downturn in demand for personal computers. U.S.-listed shares of Research in Motion tumbled 13.8 percent to $48.77 after the BlackBerry maker cut its first-quarter forecasts.

The Dow Jones industrial average (.DJI) gained 50.56 points, or 0.40 percent, to 12,813.87. The Standard & Poor’s 500 Index (.SPX) added 2.76 points, or 0.20 percent, to 1,363.24. The Nasdaq Composite Index (.IXIC) was up just 0.21 of a point, or 0.01 percent, at 2,872.74.

Merck & Co Inc (MRK.N) reported higher-than-expected quarterly earnings, fueled by strong sales of drugs for diabetes, asthma and rheumatoid arthritis, while Chevron Corp (CVX.N) reported a jump in earnings as oil prices surged.

Shares of Merck rose 0.4 percent to $35.92 while Chevron added 0.4 percent to $109.29. Both stocks are Dow components.

Robust corporate earnings, ample liquidity from the Federal Reserve and the prospect of ultra-low interest rates for the rest of the year have sparked bullishness, pushing the Nasdaq to a 10-year high and lifting the S&P 500 more than 8 percent this year. The major U.S. stock indexes also hit new yearly highs during the week.

With May, the market is heading into a typically weak period. May has been the fourth-weakest month for the Dow, averaging a 0.2 percent gain since 1950, according to the Stock Trader’s Almanac. It also normally marks the start of the worst six months of the year for the industrials.

The dollar held near a three-year low against a basket of currencies.

(Reporting by Chuck Mikolajczak; Editing by Jan Paschal)

NEW YORK (Reuters) – A strong showing by Caterpillar and other U.S. industrials’ shares led the market higher on Friday, putting the Dow on track for its best month since December.

The blue-chip average was up 4 percent for the month while the S&P has risen 2.7 percent and the Nasdaq 3.2 percent, also heading for its best month of the year.

April’s gains, however, were limited by losses at Microsoft Corp (MSFT.O), the Nasdaq index’s most heavily traded stock, and BlackBerry maker Research in Motion (RIM.TO)(RIMM.O).

Heavy machinery manufacturer Caterpillar Inc (CAT.N) climbed after reporting a fivefold increase in quarterly profit and raising its full-year forecast.

“This is another sign of how manufacturing is leading the economy,” said Eli Lustgarten, senior research analyst for the industrial machinery sector at Longbow Securities in St. Louis. “We think Caterpillar is fairly valued, but you have to be impressed with what they delivered. No matter what, this will be a good year for them.”

The stock was the top gainer on the Dow, advancing 2.4 percent to $115.35, reaching an all-time high during the session. The S&P industrial sector (.GSPI) was the top-performing sector, up 0.4 percent. Caterpillar is up more than 20 percent so far this year while the industrial sector is up 11 percent.

Microsoft slumped 3.8 percent to $25.70 and was the Dow’s biggest loser a day after it reported a dip in quarterly Windows sales, mirroring a recent downturn in personal computers. U.S.-listed shares of RIM shed 13.5 percent to $48.94 after cutting its first-quarter forecasts.

The Dow Jones industrial average (.DJI) was up 64.98 points, or 0.51 percent, at 12,828.29. The Standard & Poor’s 500 Index (.SPX) was up 3.34 points, or 0.25 percent, at 1,363.82. The Nasdaq Composite Index (.IXIC) was up 1.98 points, or 0.07 percent, at 2,874.51.

Robust corporate earnings, ample liquidity from the Federal Reserve and the prospect of ultra-low interest rates for the rest of the year have sparked bullishness, pushing the Nasdaq to a 10-year high and the S&P 500 more than 8 percent higher this year. Major indexes also hit new yearly highs during the week.

With May, the market is heading into a typically weak period. May has been the fourth weakest month for the Dow, averaging a 0.2 percent gain since 1950, according to the Stock Trader’s Almanac. It also normally marks the start of the worst six months of the year for the industrials.

“With earnings largely behind us and with the results both good and bad, I expect that we’ll see a pullback in equity markets, largely led by an increase in the dollar,” said Marshall Gause, chief executive officer at the Denver-based Geneva Fund Partners, who described the dollar’s fall as unprecedented.

The dollar held near a three-year low against a basket of currencies.

Merck & Co Inc (MRK.N) reported higher-than-expected quarterly earnings, fueled by strong sales of drugs for diabetes, asthma and rheumatoid arthritis, while Chevron Corp (CVX.N) reported a jump in earnings as oil prices surged.

Shares of Merck rose 0.5 percent to $35.98 while Chevron added 0.5 percent to $109.32. Both stocks are Dow components.

(Editing by Kenneth Barry)

NEW YORK (Reuters) – U.S. stocks opened little changed on Friday but strong quarterly results from Caterpillar (CAT.N) and Merck (MRK.N) looked set to drive the Dow to its best month since December.

The Dow Jones industrial average (.DJI) was up 15.67 points, or 0.12 percent, at 12,778.98. The Standard & Poor’s 500 Index (.SPX) was up 0.12 points, or 0.01 percent, at 1,360.60. The Nasdaq Composite Index (.IXIC) was down 2.61 points, or 0.09 percent, at 2,869.92.

(Reporting by Ryan Vlastelica)

NEW YORK – Strong earnings from technology companies including Intel Corp. sent stocks sharply higher Wednesday. The Nasdaq composite index had its biggest one-day jump in a month, and the Dow Jones industrial average traded near a new high for the year.

The Nasdaq rose 48, or 1.8 percent, to 2,793 in afternoon trading.

The Dow Jones Industrial Average rose 179 points, or 1.5 percent, to 12,446. If it holds onto the gains, the Dow would have its highest close this year, toppling the 12,426 mark reached April 6.

Intel rose 6 percent, the most of the 30 companies in the Dow average, after the chip-maker reported that its income rose 29 percent in the first quarter because of rising demand for personal computers. The results easily beat analysts’ expectations and allayed concerns that surging sales of tablet computers would hurt Intel’s results.

Amphenol Corp. rose 6 percent, the most of any company in the S&P 500 index, after reporting that its earnings per share rose 31 percent. The company makes fiber optic connectors and electrical equipment.

The Standard & Poor’s 500 index rose 16, or 1.2 percent, to 1,328.

The stronger corporate earnings reports came after mainly disappointing results released last week. Google Inc. and Alcoa Inc. were among the big companies whose earnings didn’t live up to expectations.

“The contrast from last week is driving stocks,” said Clark Yingst, chief market analyst at investment bank Joseph Gunnar.

Several other prominent companies also reported much stronger earnings. Freeport-McMoRan Copper & Gold Inc. jumped 3 percent after the mining company’s income came in well ahead of analysts’ expectations.

Industrial conglomerate United Technologies Corp. rose 4 percent after its income rose 17 percent, also beating Wall Street expectations. The company also raised its forecast for 2011 profit.

Wynn Resorts Ltd. rose 7 percent after its revenue climbed 39 percent. The casino operator opened a new Macau resort and won more money from gamblers at table games in Las Vegas.

IBM Corp. also beat earnings expectations but the stock was flat after the company said it signed fewer overseas contracts.

Yahoo Inc. rose 5 percent after reporting that cost-cutting efforts pushed its earnings above Wall Street’s expectations. Yahoo also reported a 10 percent jump in display advertising.

Not all companies beat expectations. Altria Group Inc. fell 0.6 percent after reporting that it sold fewer cigarettes.

AT&T Inc. fell 0.5 percent after saying it pulled in the lowest number of new subscribers for iPhones because of competition from Verizon.

Wells Fargo & Co. fell 5 percent. The bank reported a sharp decline in new mortgages.

BOSTON – Investors continued to warm up to the market in February, putting more money into stock mutual funds than they withdrew for the second consecutive month.

Investors deposited a net $14.8 billion to U.S. stock mutual funds last month, industry consultant Strategic Insight said Thursday. The total was down from $21 billion in January, the biggest monthly surge into stock funds in seven years.

Year-to-date, stock fund flows are off to their best start since 2007. Stock prices reached their historic peak in the fall of that year, before tanking in 2008, and beginning their long climb back in early 2009.

Since the market turned around, stocks have nearly doubled in value, and the Standard & Poor’s 500 index is up 24 percent from Sept. 1.

Yet, with the 2008 bear market still fresh in mind, investors withdrew more than they deposited for eight consecutive months last year. That string ended with January’s huge inflow. February’s numbers suggest greater confidence could be here to stay.

“U.S. investors have started to overcome their post-crisis caution,” said Avi Nachmany, research director with New York-based Strategic Insight.

Nachmany said flows into stock funds dropped off in the first week of this month. But he predicts steady demand for U.S. stock funds this year, provided the economic recovery continues.

Many foreign stock markets have recently fallen due to political unrest in the Middle East and inflation pressures from higher food and oil prices. But U.S. investors last month added a net $6 billion to funds that primarily buy foreign stocks, extending the streak of positive flows in that category to nine months. Still, last month’s total was about half of January’s surge into foreign stock funds. Nachmany attributed February’s lower total to the Mideast turmoil, and falling stock prices in emerging markets.

Sentiment among bond investors was mixed in February. Investors added a net $13 billion to taxable bond funds, which include funds that buy corporate debt. Investors withdrew a net $4.5 billion from tax-free bond funds, primarily municipal bond funds that buy the debt of state and local governments.

Investors have been pulling out of muni bonds since early November, largely due to fears about the declining fiscal health of many states and cities, and their ability to satisfy debt obligations.

NEW YORK (Reuters) – Stocks were poised for their third straight month of gains on Monday as encouraging economic data and optimistic comments from billionaire investor Warren Buffett boosted investors’ appetite.

The gains came after stocks’ worst week since November last week. Geopolitical concerns about Libya had pushed oil prices to a 2 1/2-year high, threatening global economic recovery.

Brent crude oil prices, which had jumped toward $120 a barrel last week, eased to $112.

Buffett, chairman of Berkshire Hathaway Inc (BRKa.N), spoke in his widely read annual letter to shareholders of the need for “major acquisitions,” a sign stocks may be cheap. Berkshire’s Class B (BRKb.N) shares rose 2.6 percent to $87.09.

“It’s not just him, but a lot of companies are looking for stocks to put their money into. We expect M&A activities to dramatically accelerate this year,” said Fred Dickson, chief market strategist at D.A. Davidson & Co in Lake Oswego, Oregon.

The latest acquisition news came from Ventas Inc (VTR.N), which plans to buy Nationwide Health Properties (NHP.N) in a $5.8 billion stock deal that strengthens Ventas’ position as the biggest U.S. owner of senior housing. NHP shares rose 10.5 percent to $43.07.

But the Nasdaq fell slightly, hurt by Amazon.com Inc (AMZN.O) , which fell 2.1 percent to $173.46 after UBS downgraded the online retailer, citing increased costs.

The Dow Jones industrial average (.DJI) was up 53.36 points, or 0.44 percent, at 12,183.81. The Standard & Poor’s 500 Index (.SPX) was up 2.59 points, or 0.20 percent, at 1,322.47. The Nasdaq Composite Index (.IXIC) was down 10.68 points, or 0.38 percent, at 2,770.37.

The losses suffered last week allowed the market to reduce some of its overbought condition. The S&P 500′s relative strength index (RSI), a measure of high to lower closes, was in moderate territory for a fifth day.

Comments from Federal Reserve officials hinting they were ready to support the economy if necessary helped ease concern over the scheduled end of the Fed’s $600 billion bond-buying program later this year.

New York Fed Bank President William Dudley said policymakers should be wary about withdrawing liquidity too quickly, while St. Louis Fed Bank President James Bullard would not rule out further use of the Fed’s unorthodox tool for stimulus.

Data on Monday showed Midwest business activity rose more than forecast in February.

U.S. incomes posted the largest increase since May 2009 last month. The jump partly reflected a payroll tax cut enacted last year.

(Reporting by Angela Moon, Editing by Kenneth Barry)

NEW YORK (Reuters) – U.S. stocks closed out a year of double-digit gains and the S&P’s best December since 1991 with a quiet and little changed session on Friday as investors found no reason to make big bets ahead of the new year.

Improving economic indicators late in 2010 and stimulative measures from the U.S. Federal Reserve propelled gains in the second half of the year, overcoming headwinds from Europe’s sovereign debt crisis and continued high U.S. unemployment.

The gains marked a recovery to the market’s levels before the collapse of Lehman Brothers in September 2008. For the year the S&P climbed 12.8 percent, the Dow added 11 percent and the Nasdaq surged 16.9 percent.

Friday’s session, however, had none of the vibrancy or volatility that characterized the year. Indexes ended mostly flat on light trading volume, though profit taking slightly weighed on the Nasdaq.

“Since the volume is so low, you can’t extrapolate any message that’s coming from the market, especially since there’s no news coming out,” said Bernard Baumohl, managing director and chief global economist at the Economic Outlook Group in Princeton, New Jersey.

The Dow Jones industrial average (.DJI) was up 7.80 points, or 0.07 percent, at 11,577.51. The Standard & Poor’s 500 Index (.SPX) was down 0.24 points, or 0.02 percent, at 1,257.64. The Nasdaq Composite Index (.IXIC) was down 10.11 points, or 0.38 percent, at 2,652.87.

The Nasdaq was pressured by Netflix Inc (NFLX.O) and F5 Networks Inc (FFIV.O), two stocks have performed well this year. Netflix gained 226 percent in 2010 but sank 2.3 percent to $175.70 on Friday. F5 Networks Inc (FFIV.O), up 150 percent this year, fell 1.7 percent to $130.16.

Drugstore chain CVS Caremark Corp (CVS.N) agreed to buy Universal American Corp’s (UAM.N) Medicare prescription drug business for about $1.25 billion. Universal American surged 40 percent to $20.45, while CVS slipped 0.7 percent to $34.77.

U.S.-listed shares of IMAX Corp (IMAX.O) jumped 4.5 percent to $28.07 after Britain’s Daily Mail reported that Sony Corp (6758.T) might bid at least $40 per share for the big-screen movie company. Sony denied the report.

A good deal of 2010′s rally occurred in the first half December, after President Obama announced a deal to extend Bush-era tax rates and a number of positive economic datapoints.

The S&P 500 gained 6.5 percent in the month while the Dow climbed 5.2 percent and the Nasdaq rose 6.2 percent.

The second half of the month was marked by seasonally low trading volume that was exacerbated by a blizzard in the U.S. Northeast, resulting in anemic market movement. In the final week of the year, the Dow hardly budged while the S&P rose a mere 0.1 percent. The Nasdaq fell 0.5 percent in the week.

“That we’re avoiding a sell-off today encourages the idea that we could break to the upside in January,” said Keith Springer, president of Springer Financial Advisors in Sacramento, California.

Investors will closely watch a host of data next week for any incentives to take profits or extend the rally, including new reads on construction spending, same-store sales and the services sector.

Almost four stocks rose for every three that fell on the New York Stock Exchange, while on the Nasdaq almost three stocks fell for every two that rose.

(Editing by Padraic Cassidy)

NEW YORK (Reuters) – Stocks closed their best week in a month on Friday, shrugging off tepid jobs growth in a sign that the rally may have further to run.

Late in the day, stocks gained after reports that Federal Reserve Chairman Ben Bernanke said in a CBS television interview recorded on November 30 that he does not rule out more than the announced $600 billion in Fed asset purchases. The interview with “60 Minutes” has yet to be televised.

The S&P 500 rose 3 percent this week, as investors were reassured by signs the economy is stabilizing and have taken a more optimistic view of Europe’s debt crisis. This has helped push the S&P 500 close to a new two-year high. The Nasdaq rose to nearly a three-year high.

“We’re within 5 to 6 points on the S&P of brand-new recovery cycle highs,” said Jim Paulsen, chief investment officer at Wells Capital Management, in Minneapolis. “If it does break through, there is a lot of room to the upside.”

Despite a modest day for major averages, the PHLX Semiconductor Index and the Dow Jones Transportation Average touched 52-week highs, a positive sign as both are viewed as market bellwethers.

Paulsen said the jobs number was such an outlier that it did not shake investors’ new-found confidence in the economic recovery.

“The economic momentum is not doused by what we got this morning,” he said. But he added, “If data reports start going weak in the next few weeks, then this jobs number is going to get a lot more attention.”

Volume was at its lowest level this week, according to early data, and was well below its daily average so far this year.

But the market’s breadth was overwhelmingly positive on both the New York Stock Exchange and the Nasdaq, where about eight stocks rose for every five that fell.

The Dow Jones industrial average rose 19.68 points, or 0.17 percent, to end at 11,382.09. The Standard & Poor’s 500 Index added 3.18 points, or 0.26 percent, to 1,224.71. The Nasdaq Composite Index gained 12.11 points, or 0.47 percent, to close at 2,591.46.

On Friday, the Nasdaq finished at its highest level since early January 2008.

ALCOA AND BANKS RISE, VIX FALLS

Commodity-related shares benefited from a weaker dollar, which declined after the jobs report. Aluminum company Alcoa Inc gained 1 percent to $14.22.

Financials, which had their biggest day in three months on Thursday, extended gains late in Friday’s session. The KBW bank index rose 0.8 percent.

Employment barely grew in November. Nonfarm payrolls rose by only 39,000, much weaker than the 140,000 new jobs that economists forecast. The U.S. unemployment rate unexpectedly jumped to a seven-month high of 9.8 percent, the Labor Department said.

But recent data, including retail sales and other labor reports, have raised optimism the recovery remains on track after hitting a soft patch in the summer when fears of a double-dip recession drove stocks sharply lower.

Investors also said the Federal Reserve would be less likely to cut stimulus to the economy while employment remained weak.

The lack of investor alarm over the jobs report was reflected in the CBOE Volatility Index, or VIX, known as Wall Street’s “fear gauge,” which shed 7.1 percent to 18.01

The S&P 500 faced strong technical resistance at about 1,228, near a recent high of more than two years and also the 61.8 percent Fibonacci retracement of the index’s slide from October 2007 to March 2009, a key technical indicator.

Paulson said that traders wanted to stay positioned for a potential year-end rally if stocks break through resistance.

Support for the benchmark kicks in at 1,200, which was recently a stubborn resistance point, and the top end of its recent trading range, and near 1,195, its 10-day moving average.

Also helping to curb stocks’ decline was the euro’s gain on Friday of more than 1 percent against the U.S. dollar to $1.3422. In recent weeks, the euro’s moves have been tightly coupled with U.S. and global equities.

In company news, U.S.-based mining group Walter Energy Inc agreed to buy Canada’s Western Coal Corp for about $3.25 billion to create the world’s leading metallurgical coal producer. Walter added 4.7 percent to $110.52.

Combined volume on the New York Stock Exchange, Amex and Nasdaq was 6.87 billion, compared with a daily average of 8.47 billion so far this year.

(Reporting by Edward Krudy; Editing by Jan Paschal)