The Labor Department reported 94,000 jobs were added to payrolls in November and that the unemployment rate held steady at 4.7 percent. Thomson/IFR analysts had set a median projection of 100,000 new jobs. The report also showed that average hourly earnings increased 0.5 percent in November, compared with forecasts for a more-modest 0.3 percent.
The report at least temporarily chilled a rally that has sent the Dow Jones industrials up 876 points over eight trading days.
"I'd call it an employment letdown," said Jack A. Ablin, chief investment officer at Harris Private Bank. "A little air came out of the party balloon."
"Stocks are taking a breather from a maniacal runup over the last few days," said Paul Nolte, director of investments at Hinsdale Associates. He described the stock market as paralyzed ahead of the Federal Reserve's meeting on interest rates on Tuesday, and said many investors don't want to make bold moves until the Fed's decision is announced.
On the plus side, the report did give the Fed more room to lower rates. The debate now centers on whether the central bank will drop rates by a quarter percentage point or finish the year with a half-point cut. However, Nolte noted that it would be easier to make a case for a larger cut if the November employment report had been weaker.
In late trading, the Dow Jones industrial average rose 36.26, or 0.27 percent, to 13,656.15. The Standard & Poor's 500 index rose 0.66, or 0.04 percent, to 1,508.00, while the Nasdaq composite index dipped 0.46, or 0.02 percent, to 2,708.57.
Bond prices fell Friday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 4.12 percent from 4.02 percent late Thursday. The dollar slumped, while gold prices also fell.
Light, sweet crude fell $2.27 to $87.96 per barrel on the New York Mercantile Exchange. Government data released earlier this week showed an increase in U.S. supplies of gasoline and distillates.
The University of Michigan's preliminary reading on consumer confidence for this month showed that consumers are worried about higher gas prices and weakness in the credit markets. The headline index declined to 74.5 from 76.1 in November. Thomson/IFR had forecast a 76.0 reading.
ArcelorMittal, the world's largest steelmaker, said Friday it will offer at least $1.65 billion for the remaining shares in Chinese steelmaker China Oriental Group Co. that it does not own. But analysts questioned whether Beijing would approve foreign ownership in a strategic sector of the Chinese Economy. ArcelorMittal stock rose 84 cents, of 1.15 percent, to $73.65.
Macrovision Corp., which develops technology to prevent unauthorized copying and viewing of video, music and other content, said it will buy television listings provider Gemstar-TV Guide International Inc. for $2.8 billion in cash and stock.
Shares of Macrovision slid $6.54, or 25.2 percent, to $19.45. Gemstar-TV shares lost 98 cents, or 16.4 percent, to $5.00.
James Murdoch was appointed News Corp.'s chairman and chief executive for Europe and Asia, officials said Friday. This most likely positions him as a successor to his father, Rupert Murdoch. Its shares advanced 11 cents, or 0.57 percent, to $21.24 in midday trading.
Palm Inc. dropped 73 cents, or 11.1 percent, to $5.86 after the hand-held computer maker cut its revenue outlook because of shipping delays.
And, gun maker Smith & Wesson Holding Corp. dropped after cutting its 2008 outlook. Its shares shed $2.83, or 28.5 percent, to $7.09.
Advancing issues ounumbered decliners by 8 to 7 on the New York Stock Exchange, where volume came to 804.9 million shares.
The Russell 2000 index of smaller companies fell 1.57, or 0.20 percent, to 785.38.
Overseas, Japan's Nikkei stock average closed up 0.52 percent, while Hong Kong's Hang Seng index fell 2.42 percent. Britain's FTSE 100 closed up 1.07 percent, Germany's DAX index rose 0.67 percent, and France's CAC-40 increased 0.79 percent.