Investors grew more confident about the economy but also worried that a brighter employment picture will mean rising interest rates.
Stocks closed higher Friday but only after giving up much of their earlier gains. Indexes touched new highs for year in the morning following news that job cuts fell sharply in November, but that report also brought expectations that the Federal Reserve could hike rates or remove other supports from the economy. Treasurys and gold fell as demand for safe-haven investments eased.
Jitters about interest rates left the Dow Jones industrial average with a gain of just 23 points, having been up as much as 151 points earlier. Stocks rose for the week.
The prospects of increased rates also led to a sharp rise in the dollar, which hurt prices for commodities including oil.
The Labor Department said the economy shed 11,000 jobs last month, the smallest monthly loss since December 2007, when the recession began. That's much better than the 130,000 losses Wall Street economists expected and an improvement from 111,000 jobs cuts in October.
The unemployment rate fell to 10 percent from a 26-year high of 10.2 percent in October. Economists had expected the rate to remain unchanged.
Stocks have been rising for nine months on hopes of a recovery, but investors have been worried that lingering unemployment would hold the economy back. The gains in stocks also come as the Fed's policy of low interest rates and extraordinary supports for the financial system have flooded financial markets with cash. Investors are now on edge about how markets will respond when policymakers begin to withdraw some of those measures.
Phil Orlando, chief equity market strategist at Federated Investors in New York, said the jobs report could draw investors into the market who had been skeptical about how well the economy was doing.
"This number was just phenomenal," said Phil Orlando, chief equity market strategist at Federated Investors in New York. "That sound you heard was bears fainting all across America and hitting their head on the pavement."
The Dow ended with a gain of 22.75, or 0.2 percent, to 10,388.90 after reaching a 2009 high of 10,516.70 in early trading. The Dow lagged broader indexes after DuPont, the chemicals company, warned it would delay release of several products.
The Standard & Poor's 500 index rose 6.06, or 0.6 percent, to 1,105.98, after setting a 2009 high of 1,119.13.
The Nasdaq composite index rose 21.21, or 1 percent, to 2,194.35, reaching a high for the year of 2,214.39.
For the week, the Dow rose 0.8 percent, the S&P 500 index added 1.3 percent and the Nasdaq advanced 2.6 percent.
The jobs report weighed on bond prices, pushing yields higher. The benchmark 10-year Treasury note fell about a point, pushing its yield up to 3.48 percent from 3.38 percent late Thursday.
A rise in the dollar held back an advance on the stock market. For months, stocks have fallen when the dollar strengthens because a rising greenback makes commodities more expensive for foreign buyers and can eat into the profits U.S. companies collect from overseas.
The ICE Futures U.S. dollar index, which measures the greenback against a basket of foreign currencies, rose 1.4 percent.
Gold fell $78.80 to $1,169.50 an ounce on the New York Mercantile Exchange. Meanwhile, crude oil fell 99 cents to settle at a seven-week low of $75.47 a barrel.
Charlie Smith, chief investment officer at Fort Pitt Capital in Pittsburgh, said some traders are worrying that the Fed will try to wean big banks from low-cost loans and disrupt trades that have been profitable this year. He contends that spoiling the easy trades could prompt banks to boost lending as they look for more places to put their money.
"It forces the bankers to be bankers instead of just sort of taking the free money from the Fed and buying Treasurys with it," Smith said.
The week began as the market closed a strong November. The S&P 500 index advanced 5.7 percent for the month, its biggest increase since July. The index, which is used to measure many investments like mutual funds, has risen 63.5 percent from a 12-year low in March.
Stocks recovered during the week from worries that debt problems in the Middle Eastern city-state of Dubai would trigger a wave of credit problems like the kind that felled the brokerage Lehman Brothers last year.
Investors will have fewer economic reports to go on next week, but are likely to again take cues from the direction of the dollar.
Among stocks, DuPont fell $2.49, or 7.2 percent, to $32.34 after the company said it would delay release of certain corn and soybean seeds.
Two stocks rose for every one that fell on the New York Stock Exchange, where volume came to 1.6 billion shares compared with 1.1 billion Thursday.
The Russell 2000 index of smaller companies rose 14.01, or 2.4 percent, to 602.79.
Overseas, Britain's FTSE 100 rose 0.2 percent, Germany's DAX index rose 0.8 percent, and France's CAC-40 jumped 1.3 percent. Japan's Nikkei stock average rose 0.5 percent.