The S&P 500 advanced for a fifth day on Friday after an unexpected drop in the unemployment rate suggested the U.S. economy is on the right track.
Growth-oriented stocks were the day's top gainers. The S&P industrial sector index rose 0.6 percent. An S&P financial sector index added 0.1 percent.
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All three major U.S. stock indexes had pulled off session highs by mid-afternoon, suggesting the market may struggle to make further progress with third-quarter earnings season starting next week. The Dow industrials maintained a modest gain, after touching an intraday peak that was its highest in almost five years. The Nasdaq was flat, dipping a toe into negative territory.
The S&P 500 is still up 16.4 percent so far this year. The benchmark is on track for its best yearly run since 2009 when stocks rebounded after the financial crisis.
"On the negative side, the speed with which the market will get overbought on continued strength may pose a problem," said Ralph Edwards, director of derivatives strategy at ITG in New York.
"The market never had a truly ugly day since the highs registered on September 14th."
Much of the market's gains this year have been prompted by easy monetary policies. The improvement in U.S. hiring last month is one bright spot as manufacturing around the world has been showing signs of softness in recent months.
The Dow Jones industrial average gained 38.87 points, or 0.29 percent, to 13,614.23. But the Standard & Poor's 500 Index rose 2.09 points, or 0.14 percent, to 1,463.49. The Nasdaq Composite Index dipped 1.99 points, or 0.06 percent, at 3,147.46.
Labor Department data showed the jobless rate dropped by 0.3 percentage point in September to 7.8 percent, its lowest since January 2009. Investors focused on a survey of households that pointed to a big surge in hiring.
A separate survey of business establishments showed employers added 114,000 jobs to their payrolls last month while data for July and August was revised to show 86,000 more jobs created than previously reported.
"What this suggests at the end of the day is that demand in the United States will hold up reasonably well," said Kevin Caron, market strategist at Stifel, Nicolaus & Co in Florham Park, New Jersey.
With hiring still well below full recovery levels, the employment data also leaves the door open to more stimulus from the Federal Reserve.
"It wasn't so strong that it upset the apple cart for those that are looking for additional easing by the central banks," Caron said.
Zynga shares plunged 16.7 percent to $2.35 after it slashed its 2012 outlook for a second time, fanning doubts about the games maker's ability to shore up its dwindling earnings.
Facebook , which derives more than a tenth of its revenue from fees paid by Zynga, lost 2.5 percent to $21.40.
Investors will turn their attention next week to the start of the third-quarter earnings season. S&P 500 companies' earnings are expected to drop more than 2 percent in the quarter, compared with a year earlier, according to Thomson Reuters data. The decline would be the first since 2009.
Dow component Alcoa Inc will kick off the earnings period on Tuesday, when the aluminum company is expected to report that it broke even, compared with earnings of 15 cents a share a year ago. Alcoa's stock was unchanged at $9.07 in mid-afternoon trading on Friday.
Sprint Nextel is considering making a rival bid for MetroPCS Communications , which agreed on Wednesday to a merger with Deutsche Telekom's T-Mobile USA, according to people familiar with the situation.
Sprint Nextel shares rose 2.1 percent to $5.20, while MetroPCS gained 1.3 percent to $12.85.
(Editing by Jan Paschal)