US STOCKS-Wall Street rises, fueled by brighter jobs picture
* June jobs creation exceeds forecasts
* Markets gyrate in light post-holiday volume
* Investors worry about Fed cutting back on stimulus
* Dow flat, S&P up 0.2 percent, Nasdaq up 0.2 percent
NEW YORK, July 5 (Reuters) - U.S. stocks rose in a seesaw session on Friday after solid jobs data pointed to a strengthening economy, but the report also raised the odds the Federal Reserve will begin to cut its stimulus measures within the next few months.
Employers added about 195,000 jobs in June, exceeding expectations of 165,000, and jobs growth in previous months was revised higher. But the unemployment rate remained unchanged at 7.6 percent.
Major indexes hit higher levels in early trading but pulled back and were nearly flat before advancing again. Volume was light.
Sectors tied to the pace of economic growth and an improved outlook for lending advanced, including small-cap shares and banks.
"Fear is mounting that the Fed will start tapering in September on the back of the good employment report," said Andre Bakhos, director of market analytics at Lek Securities in New York.
"The intraday move we're seeing is symptomatic of a light Wall Street attendance where participants are extending the weekend, and a case of good news is bad news."
The Dow Jones industrial average was up 3.72 points, or 0.02 percent, at 14,992.27. The Standard & Poor's 500 Index was up 2.48 points, or 0.15 percent, at 1,617.89. The Nasdaq Composite Index was up 6.03 points, or 0.18 percent, at 3,449.70.
About 1.8 billion shares had changed hands on U.S. exchanges as of 11:15 a.m. (1515 GMT), lighter than average.
Interest rates rose sharply on Friday in anticipation that the Fed will start cutting its monthly bond buying, which was key factor in stocks' recent gains, as early as September.
Bank of America Corp added 0.8 percent to $12.92 while Citigroup Inc was up 0.5 percent to $47.89. Large banks benefit when interest rates rise as it increases their net interest margin.
The S&P small-cap 600 index gained 0.4 percent, moving within 1 percent of an all-time high.
Annaly Capital Management, a real estate investment trust geared to mortgage-backed securities, slid 6 percent to $11.40 as the yield on the benchmark 10-year U.S. Treasury note spiked above 2.7 percent. Annaly Capital was the fifth most-traded stock on the New York Stock Exchange.
The S&P 500 is down more than 3 percent from its May 21 record closing high of 1,669.16 and has been unable to close above its 50-day moving average since June 19. The 50-day moving average is a measure of the market's medium-term trend.
Wall Street has been closely tethered to central banks' policies. It received a boost after central banks in Britain and the euro zone signaled on Thursday that they were holding steady their stimulus measures.