Stocks inch higher

NEW YORK (CNNMoney.com) -- Stocks managed modest gains Thursday afternoon, as investors welcomed the morning's mostly upbeat economic news, but held back a bit amid rising Treasury bond yields and revived worries about the financial sector.

The Dow Jones industrial average (up 29.88 to 12,290.58, Charts), the broader S&P 500 (up 3.47 to 1,405.36, Charts) index and the tech-heavy Nasdaq (up 4.97 to 2,392.70, Charts) composite all gained 0.2 percent roughly three hours into the session.

Stocks rallied at the opening as investors welcomed the mostly positive jobs report as well as readings on the trade gap and wholesale inventories that all suggested the economy is holding up well.

But the advance lost some steam, with investors cautious at the end of a very volatile period on Wall Street.

"I think people are tired of the emotional roller coaster of the last two weeks," said Scott Merritt, U.S. equity strategist at JPMorgan Asset Management. "They were looking for an excuse to find a real positive or negative in the jobs report, and I don't think it was there."

Barring a steep sell-off later in the session, stocks are set to end the week higher, with investors having managed to recover nearly one-third of what was lost last week.

Last week was the worst week for the stock market in more than four years, after tumbling Chinese markets and a batch of weak economic reports sparked a mass exodus on Wall Street.

Employers added 97,000 jobs to their payrolls in February, versus expectations for 100,000. But both December and January payroll gains were revised higher.

In addition, the unemployment rate, generated by a separate survey, fell to 4.5 percent from 4.6 percent in January, surprising economists who thought, on average, it would hold steady.

Average hourly earnings, the report's inflation component, rose 0.4 percent last month versus expectations for a rise of 0.3 percent. Earnings rose 0.2 percent in January.

The payrolls growth is basically neutral for the markets, Merritt said, while the drop in unemployment and rise in average hourly earnings are "not good news for inflation doves."

A separate report showed that the January trade balance narrowed more than expected.

A third report showed a bigger than expected jump in January wholesale inventories.

All of which sent Treasury prices tumbling, as bond investors bet the Fed is unlikely to cut interest rates any time soon. The decline raised the yield on the 10-year note to 4.59 percent from 4.51 percent late Thursday. Treasury prices and yields move in opposite directions.

Alcoa (up $0.76 to $33.25, Charts), DuPont (up $0.52 to $51.34, Charts) and McDonald's (up $0.73 to $44.37, Charts) were among the stocks giving the Dow a boost.

National Semiconductor (up $0.89 to $26.17, Charts) rallied after the company said late Thursday that, with inventory worries over, revenue in the current quarter should come in ahead of analysts' expectations. The chip maker also reported lower fiscal third-quarter earnings that topped analysts' forecasts.

Yahoo! (down $1.69 to $29.02, Charts) dragged on the Nasdaq composite on news that AT&T wants to scale back its partnership with the search engine, according to a Wall Street Journal article.

New Century Financial (down $0.80 to $3.07, Charts) slumped 20 percent in active trade on revived worries that it will have to file for bankruptcy. Late Thursday, the company said that it has stopped taking new loans because some of its financial backers won't provide access to financing.

New Century was one of several subprime mortgage lenders slumping Friday, along with Fremont General (down $0.56 to $7.78, Charts) and Accredited Home Lenders (down $1.85 to $14.93, Charts).

Market breadth was positive. On the New York Stock Exchange, winners beat losers 3 to 2 on volume of 675 million shares. On the Nasdaq, advancers topped decliners by 4 to 3 on volume of close to 1 billion shares.

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

U.S. light crude oil for April delivery fell 79 cents to $60.85 a barrel on the New York Mercantile Exchange.

COMEX gold for April delivery fell $1.70 to $653.80 an ounce.

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