updated 12/11/2006 9:11:12 AM ET 2006-12-11T14:11:12

Wall Street ended an erratic week with a moderate advance Friday, as investors welcomed a government employment report that painted the U.S. job market as robust heading into the holiday season, easing concerns that the economy is losing steam too quickly. The major indexes all posted gains for the week.

Major Market Indices

The Labor Department report showed a slightly better-than-expected increase in jobs creation last month and ultimately helped diminish nervousness about a drop in the dollar and a weaker-than-expected reading from the University of Michigan’s consumer confidence figure.

“What this number does is it breaks the streak of several weak economic indicators you’ve had until today,” John Shin, an economist at Lehman Brothers Holdings Inc., said of the jobs figure.

Wall Street has pored over economic data in recent months as it tries to determine whether the health of the economy warrants the run-up seen in stocks since September. Shin contends the jobs figure raises Wall Street’s hopes about a slew of economic data expected next week, including retail sales figures.

The Dow Jones industrial average finished the day up 29.08 points, or 0.24 percent, while the broader Standard & Poor’s 500-stock index was up 2.55 points, or 0.18 percent. The technology-rich Nasdaq composite index added 9.67 points, or 0.40 percent.

This week, the Dow rose 0.93 percent, the Nasdaq gained 1 percent, and the S&P 500 added 0.94 percent. The gains help set the major indexes up for double-digit gains this year, with the Dow up 14.84 percent, the Nasdaq 10.52 percent, and the S&P up 12.94 percent.

Light, sweet crude fell 46 cents to $62.03 a barrel on the New York Mercantile Exchange.

Bonds fell, with the yield on the benchmark 10-year Treasury note rising to 4.55 percent from 4.49 percent late Thursday. The dollar was mixed against other major currencies, while gold prices rose.

Investors were eyeing the jobs report all week as they try to square their concerns about consumer spending and inflation.

Wall Street wants employment to remain strong so consumers feel emboldened to keep spending through the holidays but also doesn’t want wages to rise too quickly and make the inflation-wary Federal Reserve less likely to eventually cut short-term interest rates.

Shin contends the jobs report provides clarity on the Fed’s course. “It takes the possibility of a January Fed rate cut off the table,” he said. The central bank’s policy making Open Market Committee meets Tuesday, and while the meeting will be closely watched, Wall Street doesn’t generally expect a change in interest rate policy. The Fed has left rates unchanged at its last three meetings, interrupting a string of 17 straight increases since 2004.

A weak jobs report could have lent support to the notion that the Fed would have to act sooner than expected to lower rates. But the Labor Department found that employers added 132,000 jobs last month — greater than the expected increase of 105,000 — and that the unemployment ticked up to 4.5 percent from a five-year low of 4.4 percent in October. Investors didn’t view the unemployment increase as worrisome, as they had expected workers would file into the market to seek holiday jobs.

“The average hourly earning is up over 4 percent now,” Alan Gayle, senior investment strategist at Trusco Capital Management. “That’s good news for consumer pocketbooks but it’s further buttressing the Fed’s concern about potentially higher inflation.”

Enthusiasm over the jobs report was interrupted briefly by the University of Michigan’s preliminary consumer confidence reading for December , which came in at 90.2 compared with the reading of 92 analysts expected and the 92.1 seen in November. The findings followed the Conference Board’s report last week of a drop in consumer sentiment.

Also, volatility in the dollar had unnerved some investors. But most looked past currency weakness to send technology and consumer discretionary spending stocks higher.

3M Corp., one of the 30 stocks that comprise the Dow index, fell $1 to $78.56 after a Prudential Equity Group analyst lowered his rating on the diversified manufacturer, saying a pickup in sales growth could take longer than investors might expect.

Banks were also in focus, with speculation Bank of America Corp. might make a bid for London-based Barclays PLC . BofA shares fell 83 cents to $51.66. Citigroup Inc. rose $1.14, or 2.3 percent, to $51.85 amid rumors the financial conglomerate could be split up. The stock broke through a previous 52-week high of $51.33 to trade as high as $52.70.

Heelys Inc., a maker of children’s sneakers that have built-in wheels, began trading on the Nasdaq following an initial public offering, jumping 55 percent.

Yum Brands Inc., which operates Taco Bell and other restaurant chains, fell $1.36, or 2.2 percent, to $59.72 amid growing concern about an outbreak of E. coli in some of its restaurants . A Wachovia analyst lowered his rating on the company to “Market Perform” from “Outperform.”

Overseas, Japan’s Nikkei stock average closed down 0.34 percent. Britain’s FTSE 100 ended up 0.34 percent, Germany’s DAX index closed up 0.22 percent and France’s CAC-40 was up 0.09 percent.

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