Wall Street looks for direction

NEW YORK (CNNMoney.com) -- Stocks were mixed Friday afternoon as investors welcomed a mostly upbeat November jobs report, but showed caution ahead of next week's Fed policy meeting.

The Dow Jones industrial average (Charts) added a few points three hours into the session. The broader S&P 500 (Charts) index was a little changed. The tech-fueled Nasdaq (Charts) composite lost a few points.

Employers added 94,000 jobs to their payrolls in November, following an upwardly revised 170,000 gain in October. The unemployment rate held steady at 4.7 percent, instead of rising to 4.8 percent as expected. Average hourly earnings rose 0.5 percent after rising 0.1 percent in October. Analysts, on average, thought it would rise 0.3 percent.

The report overall seemed to suggest the economy is holding up despite the challenges of the mortgage and housing market crisis. The jump in average hourly earnings could be seen as inflationary, which stock investors don't like, but it could also be seen as a good sign for consumer spending as the holiday shopping period rolls on.

But despite the positives, stocks struggled in the morning, while bonds plunged, raising the corresponding yields.

"The report is more of a confirmation than anything new," said Douglas Roberts, chief investment strategist at ChannelCapitalResearch.com, referring to recent readings on weekly jobless claims and the ADP reading on private sector employment released Wednesday.

"I think stocks are backing up a little because they've had a good run and this report probably limits the chance of the Fed cutting rates by 50 basis points," he said.

But Roberts added that there wasn't much selling pressure either, since Wall Street is banking on at least a 25 basis point cut.

The Fed's policy committee, meeting Tuesday, is widely expected to cut the fed funds rate, a key short-term lending rate, by a quarter-percentage point, or 25 basis points, to 4.25 percent, after cutting rates at the last two meetings. Of late, some Wall Streeters have been hoping for a cut of a half-percentage point, or 50 basis points. There are 100 basis points in one percentage point.

Treasury prices slumped, boosting the yield on the 10-year to 4.12 percent from 4.00 percent late Thursday. Treasury prices and yields move in opposite directions.

In a separate report, the University of Michigan's consumer sentiment index fell to 74.5 in early December from 76.1 in late November. Economists thought it would fall to 75.0.

The tech-heavy Nasdaq composite slipped, after component Palm (Charts) issued a profit warning. Gemstar-TV Guide (Charts) slumped 13 percent and was the Nasdaq's most-actively traded issue after agreeing to be bought by Macrovision (Charts) for $2.8 billion.

Among other movers, American Express (Charts, Fortune 500) lost nearly 3 percent after Merrill Lynch downgraded it to "sell."

Market breadth was mixed. On the New York Stock Exchange, winners beat losers on volume of 550 million shares. On the Nasdaq, decliners topped advancers by a slim margin on volume of 1.05 billion shares.

Stocks had rallied Thursday, gaining for a second consecutive session, as investors welcomed the White House's plan to help troubled homeowners and geared up for Friday's jobs report and next week's Fed policy meeting.

U.S. light crude oil for January delivery fell $2.43 to $87.80 a barrel on the New York Mercantile Exchange.

COMEX gold for February delivery fell $6.60 to $800.50 an ounce.