NEW YORK (CNNMoney.com) -- Wall Street had a little party Friday ahead of the Labor Day weekend as investors welcomed a jobs report that showed strong, but not too strong growth and only mild wage inflation.

The Dow Jones industrial average (up 84.76 to 11,465.91, Charts) added 0.7 percent and was its highest since mid-May with around an hour left in the session.

Special Reportfull coverage Fewer jobs for unemployed workers Unemployment claims rise Half of workers unhappy in their jobs Unemployment claims stuck above 400,000 State, local layoffs to hit record levels

The broader Standard & Poor's 500 (up 6.52 to 1,310.34, Charts) index and the Nasdaq composite (up 8.26 to 2,192.01, Charts)both saw slightly smaller gains.

Stocks ended little changed Thursday after an unusually strong August. The tone Friday, the first day of September, was positive as well, as investors welcomed a slew of mostly upbeat economic news.

One analyst said the jobs report in the morning was a relief in that it showed both a strong economy and less inflation pressure, but also noted the light volume on Wall Street.

"The path of least resistance right now is up," said John Wilson, managing director at the brokerage Morgan Keegan, saying volume on the NYSE is 50 percent below average. "All three traders are probably on the floor today," he joked.

Employers added 128,000 workers to payrolls last month, up from 121,000 the previous month and just above economists' forecasts for 125,000. The unemployment rate dipped to 4.7 percent from 4.8 percent.

Meanwhile, the report's inflation indicator, average hourly earnings, rose a smaller-than-expected 0.1 percent.

The report seemed to support recent hopes that the economic slowdown will not be as bad as has been feared, while the mild read on inflation helped relieve concerns that the the Federal Reserve will resume its recently paused interest-rate hike campaign.

Also released in the morning: the University of Michigan's August consumer sentiment index, which was revised up to 82.0 from an initial read of 78.7, topping economists' expectations. The report also showed that expectations for the economy over the next 12 months worsened.

Another report, the Institute for Supply Management's ISM manufacturing index, dipped to 54.5, from 54.7 in July. Economists surveyed by Briefing.com thought it would hold steady at 54.7. A reading above 50 points to growth in the sector.

The read on July construction spending was less upbeat. Spending dropped 1.2 percent in the month, the government said Friday, versus forecasts for no change. Spending rose an upwardly revised 0.4 percent in June.

Blue-chip gains were broad-based, with all but 3 of the Dow 30 rising.

Blue-chip gainers included Alcoa (up $0.53 to $29.12, Charts), Caterpillar (up $1.12 to $67.47, Charts), AT&T (up $0.54 to $31.67, Charts), DuPont (up $0.75 to $40.72, Charts) and Wal-Mart Stores (up $1.01 to $45.73, Charts).

Intel (up $0.22 to $19.79, Charts) gained 1.1 percent on speculation that it may cut up to 10 percent of its work force, as soon as next Tuesday.

General Motors (up $0.83 to $30.01, Charts) held on to a 2 percent gain despite overall sales in August that fell short of estimates. The automaker reported about a 4 percent gain in U.S. sales, short of the 10 percent rise forecast by sales tracker Edmunds.com.

Ford Motor (down $0.04 to $8.33, Charts) lost under 1 percent after it said overall sales fell 12 percent in August.

DaimlerChrysler (Charts) reported a 7 percent rise in U.S. sales for its luxury Mercedes brand but its core Chrysler Group unit saw a 4 percent drop, leading to a 3 percent drop in sales overall. Edmunds had expected Chrysler to post a 12 percent decline in sales in the month. Daimler shares rose less that 1 percent in New York.

Bristol-Myers Squibb (up $1.20 to $22.95, Charts) jumped after a U.S. judge agreed late Thursday to block the sale of a generic form of the Plavix blood thinner it markets with French partner Sanofi-Aventis (up $0.46 to $45.41, Charts).

But the judge denied a motion to recall supplies of the generic version that have already been distributed by a Canadian company. That caused Sanofi to cut its 2006 profit forecast.

Bristol shares gained 5.5 percent in active New York Stock Exchange trading. Sanofi's American depositary receipts inched higher.

OmniVision (down $1.14 to $15.46, Charts), a maker of image-sensor devices, sank 6.9 percent on the Nasdaq after warning late Thursday that second-quarter earnings and revenue won't meet estimates.

Transocean (up $3.89 to $70.64, Charts), a drilling rig contractor, surged 5.7 percent in active New York Stock Exchange trade on late Thursday news that it won a five-year contract worth up to $862 million to build a drill ship for Chevron (up $0.26 to $64.66, Charts).

Market breadth was positive. On the New York Stock Exchange, winners beat losers two to one on volume of 843 million shares. On the Nasdaq, advancers topped decliners by five to four on volume of 1.05 billion shares.

U.S. light crude oil for October delivery fell $1.07 to settle at $69.19 a barrel on the New York Mercantile Exchange in a shortened session.

Treasury prices ended a shortened session mixed, leaving the 10-year note yield at about 4.73 percent. Bond prices and yields move in opposite directions.

In currency trading, the dollar fell versus the yen and euro.

COMEX gold for December delivery fell $1.60 to settle at $632.60 an ounce.

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