An encouraging U.S. jobs report propelled blue-chip stocks to their highest level since October 2007 on Friday, closing above the closely watched 14,000 bulwark as investors momentarily sidelined their concerns about the recovery.

The government reported that nonfarm payrolls rose 157,000 in January, while the unemployment rate inched up by a tenth of a point, to 7.9 percent. The figures were in line with Wall Street forecasts, with most analysts expecting the figures to bolster the Federal Reserve's plans to inject the economy with massive stimulus.

(Read more: Economy Adds Another 157,000 Jobs; Rate Up to 7.9 Percent)

U.S. stock market index futures rose after the government reported that nonfarm payrolls rose 157,000 for the first month of 2013, with the unemployment rate edging up, a sign that labor markets are continuing to mend.

Dow Jones Futures jumped by 106 points, with the S&P Futures spiking by 10 points. Meanwhile, the Nasdaq Futures index also surged by more than 20 points.

The news, while encouraging, was unlikely to alter the Federal Reserve's monetary policy or instill confidence that the recovery is gaining steam.

Economists polled by Reuters forecast non-farm payrolls rose by 155,000 in January, a repeat of December's gain. The unemployment rate is seen remaining at 7.8 percent.

"Most of the monthly indicators have improved, with initial jobless claims falling and the employment indices of the ISM (Institute for Supply Management) activity surveys rising," Paul Dales, an economist at independent research firm Capital Economics, said in a note on Thursday afternoon.

(Read More: Stock Market Braces for a Blah Jobs Report)

Stocks fell in listless Thursday trading, as a batch of disappointing corporate earnings and a rise in first time jobless claims eventually overtook investors' impulse to buy.

In directionless trading, the Dow Jones Industrial Average ended the session down about 44 points, hovering near 13,865. The S&P 500 Index fell by about four points, finishing a hair below the key level of 1,500, while the the Nasdaq was fractionally lower at 3,142.

Still, the beneficial "January effect" that originally had the Dow flirting with a new high above 14,000 helped the index gain six percent this month. The S&P has gained five percent during January, with the Nasdaq rising four percent. Blue chips posted their best monthly gain since October 2011, and the S&P had its best January performance since 1997.

(Read more: Why the Dow May Not Make It to 14,000)

Although most quarterly earnings reports have been strong, a bearish case for the economy seems to be building, with key data coming in softer than expected.

Analysts say Washington's unresolved budget conflicts have kept some investors on the sidelines. Along with tame economic figures, the threat of sequestration — a mix of automatic spending cuts and tax hikes — have begun to unnerve markets.

On Thursday, economic bellwether companies like Dow Chemical and UPS interrupted a string of relatively encouraging earnings reports. Both fell short of market expectations, citing pockets of weakness at home and abroad.

"You have very mixed results from barometer earnings," Michael Yoshikami, Destination Wealth Management founder and CEO, told CNBC's "Closing Bell".

"What you're starting to see are corporate earnings still being very solid….but the underlying economy is still what I would call a stumbling recovery," he said. "It's getting better but it's going to be two steps forward and one step back."

(Read more: January Barometer May Not Deliver This Time Around)

Thursday's uninspired trading and mixed data set the stage for Friday's December payrolls data, which could either confirm or deny the growing belief that the economic recovery is faltering.

Earlier in the session, markets briefly reacted to news that the Department of Justice moved to Anheuser-Busch InBev's proposed $20.1 billion deal for the rest of the Mexican brewer Grupo Modelo, which put Constellation Brands' plans to fully acquire Crown Imports at risk.

Beer shares bore the brunt of investor displeasure over the antitrust offensive. Constellation's stock was crushed as investors shaved nearly 20 percent off its stock price. Anheuser's shares fell about seven percent to -- other alcohol-related stocks fell in sympathy, seeing Boston Beer and Molson Coors slide by about a percent each.

(Read more: Constellation Shares Drop as DOJ Blocks Modelo Deal.)

The decision converged with less than spectacular earnings results from two corporate giants, and a rise in first time unemployment benefits that dovetailed with Wednesday's glum fourth quarter data. Although a key business barometer helped contain some of the gloom, most investors remained on the sidelines ahead of Friday's U.S. payrolls report.

U.S. stock index futures pointed to a slightly lower open on Thursday as economic reports showed a mixed bag on the state of the recovery.

On the heels of Wednesday's reported contraction in economic growth, the government said Thursday that weekly jobless claims rose after two weeks of declines, though personal income rose sharply and spending gained as well.

Major U.S. stock benchmarks fell on Wednesday, after dour U.S. growth data reinforced a decision by the Federal Reserve to maintain its commitment to massive economic stimulus.

In a decision widely expected by analysts, the Fed emphasized that it would stick to its bond buying program. That outcome was cast into doubt just weeks ago, after minutes from the central bank's last policy meeting showed some Fed members were growing concerned about ultra-low borrowing costs.

The decision converged with data that showed the U.S. economy shrank by an annualized 0.1 percent in the final three months of 2012, and reinforced expectations that the Fed would likely err on the side of more stimulus.

Despite a run of strong corporate earnings, the GDP data fanned concerns about the economy's ability to absorb higher tax rates — some of which took effect when the payroll tax holiday expired at the beginning of the year — and efforts to cut government spending.

"The real risk out there, and the Fed was very vague in how they characterized it…I think we're going to see major government spending cuts that are going to come through sequestration," Diane Swonk, chief economist and senior managing director, Mesirow Financial, told CNBC's "Street Signs"

"That is something the Fed has to deal with. That not only means weaker growth, which justifies lower rates, but it also means more Fed action."

After floating for most of the session between modest gains and losses in directionless trading, the Dow Jones Industrial Average shed about 44 points, trading around 13,910.42, drifting further away from the psychologically-important 14,000 barrier being watched by analysts.

The S&P 500 Index slipped by nearly six points to 1,501.96, while the the Nasdaq dipped 11 points to trade above 3,142.31.

The CBOE Volatility Index (VIX), widely considered to be the market's best gauge of fear in the market, rose above just shy of 14.

Meanwhile, after weeks of buying on the rumor of Research In Motion's new BlackBerry 10, investors on Wednesday opted to sell the fact.

The company — which officially changed its corporate name to BlackBerry — unveiled the new smartphone that many analysts see as essential to its long-term survival. Still, investors voted with their feet as RIMM plunged more than ten percent in volatile trading. It finished the session near near $14.

Volume in the company's stock this month is 85 percent higher than the average daily volume in the previous three months, 34.2 million. RIMM is up about 29 percent this month, its largest gainsince November, when it rose 46 percent.

(Read more: RIM, Now Named Blackberry, Finally Launches Blackberry 10.)

The GDP report came just on the heels of a policy decision by the Fed. Some analysts, however, saw the slippage in U.S. growth as a temporary blip.

(Read more: Why Markets Aren't Worried About Bad GDP Report.)

"[The] bottom line is that while this is the first reading for output for the final quarter, both inventories and trade could be revised firmer," said Andrew Wilkinson, chief economic strategist at Miller Tabak.

"We expect 2013 to start with a rebound in inventory building, something evidenced by firm durable goods orders that will likely filter through into shipments moving into" the first quarter of this year, he added.

Still, markets were encouraged by a spate of strong quarterly earnings reports. Boeing rose one percent after the company reported fourth-quarter profit of $1.28 per share, above analyst estimates. The company dismissed speculation that its bottom line would take a hit from widely publicized problems with its 787 Dreamliner, and expects to maintain its production and delivery forecast.

U.S. stock index futures surrendered earlier gains on news that U.S. economic growth turned negative in the fourth quarter.

The Commerce Department said gross domestic product fell 0.1 percent in the quarter, well below expectations of modest 1 percent growth, though much of the drag appeared to come from cuts in inventory and government spending.

Consumer and business spending, considered integral economic drivers, both improved in the market, while home building also rose.

Market losses were muted, with an open around breakeven likely.

Investors also will be watching the Federal Reserve's first policy statement of 2013. as well as a fresh round of earnings.

Dow compoent Boeing delivered a positive surprise, reporting a profit of $1.28 a share, nine cents ahead of estimates, while revenue was roughly in line at $22.38 billion. Shares gained nearly 1 percent in premarket trading. (Read More: Boeing Was Aware of Battery Problems Before the Fires)

In other economic news, a report from ADP and Moody's Analytics showed private businesses created 196,000 new jobs from December to January, a number that was better than estimates.

The Fed will announce the outcome of its two-day Federal Open Market Committee meeting at 2:15 p.m. New York time.

"The first FOMC meeting of 2013 is unlikely to bring any major policy changes. After all, it comes only six weeks after the Fed expanded its large-scale asset purchases and linked its pledge to leave rates at near-zero to explicit thresholds for the unemployment rate and inflation, " wrote Economist Paul Ashworth in a research note by independent research firm Capital Economics.

"The annual rotation of voting members will have little impact too, although the group will be slightly more dovish this year."

Stocks closed higher on Tuesday as the Dow marched toward the 14,000 level and investors looked ahead to Wednesday's Federal Reserve policy announcement.

A gain in the energy sector following strong earnings from refiner Valero and big gains in the pharma sector after Pfizer's solid earnings report supported stocks.

U.S. stock index futures pointed to a slightly lower open on Tuesday, with investors cautious ahead of the Federal Reserve's announcement on monetary policy on Wednesday.

Earnings helped take some of the edge off the slightly downbeat sentiment, as two pharmaceutical companies both beat analyst estimates.

Pfizer reported profit of 47 cents a share net of items, three cents ahead of expectations and enough to see shares edge higher in pre-market trading. Eli Lilly, meanwhile, said its profit fell to 74 cents per share but was still ahead of expectations, sending shares modestly higher.

However, Ford Motor disappointed the market, with the automaker reporting profit of 31 cents that easily topped estimates but forecasting a wider loss in Europe because of the recession there. Shares fell about 1 percent.

(Read More: Toyota Wins Back World's Top Auto Sales Crown From GM)

In technology, Yahoo reported a fourth-quarter profit of 32 cents per share, four cents above estimates, with revenues essentially in line. Yahoo's current quarter revenue project was below consensus, but its full-year projections were above. Yahoo did benefit from higher ad prices in its first full quarter under CEO Marissa Mayer.

The Federal Reserve's Open Market Committee begins its two-day meeting on Tuesday, before releasing its decision on policy on Wednesday.

Wall Street closed mixed on Monday, as stocks struggled to extend the January rally for another session. Apple led tech stocks higher with a 2 percent rebound while Caterpillar gave support to blue chips following its earnings report.

The Dow Jones Industrial Average shed 14.05 points, or 0.1 percent, to close at 13881.93, while the S&P 500 edged 2.78 points lower or 0.18 percent, to close at 1500.18. The Nasdaq posted a modest gain 4.59 point gain, or 0.15 percent, to finish at 3154.30.

Caterpillar was the biggest blue-chip gainer, while Alcoa paced the declines.

The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded near 13.5.

Among S&P sectors, materials lagged, while tech and telecoms rose.

Stocks closed higher Friday, with the S&P 500 ending above 1,500 and logging its longest winning streak since November 2004, boosted by a batch of upbeat corporate earnings reports. All three major averages turned in their fourth-consecutive weekly gain.

"Slowly but steadily, things have moved up and we've seen some signs money being diverted into stocks instead of bond funds," said Art Cashin, director of floor operations at UBS Financial Services. "But having said that, none of the rally has turned into an outright stampede—We haven't seen huge volume or a sense of short squeeze."

Meanwhile, Apple fell to hit a 52-week low, extending losses a day after the iPhone maker plunged more than 12 percent. Apple has plunged nearly 40 percent from its all-time high of $705 a share in September. Apple lost its title as the world's most valuable company by market cap to oil giant ExxonMobil. (Read More: Why Apple No Longer Drives Markets)