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Stocks End Mixed, but Log Strong Weekly Gains

Stocks closed mixed Friday, as even a strong government employment report was not enough to offset ongoing worries over the euro zone debt crisis.

Still, all three major averages logged strong gains for the shortened trading week.

The Dow Jones Industrial Average fell 55.78 points, or 0.45 percent, to finish at 12,359.92, dragged by Alcoa and BofA.

The S&P 500 slipped 3.25 points, or 0.25 percent, to end at 1,277.81. Nasdaq gained 4.36 points, or 0.16 percent, to close at 2674.22. The Nasdaq posted its best week in six.

The CBOE Volatility Index, widely considered the best gauge of fear in the market, finished below 21.

For the week, the Dow jumped 1.17 percent, the S&P climbed 1.61 percent and the Nasdaq soared 2.65 percent. BofA was the biggest Dow gainer, while Verizon slumped.

Materials were the best performers among S&P sectors, while telecoms declined.

Non-farm payrolls jumped 200,000 in December, according to the Labor Department, pushing the jobless rate to a near three-year low of 8.5 percent. Economists polled by Reuters expected a gain of 150,000.

Futures soared immediately following the report, but the rally soon fizzled as some skeptical traders attributed the robust gain to a temporary seasonal effect.

"The wildcard is Januaryas retailers trim seasonal staff," said Todd Schoenberger, managing director of LandColt Trading. "An upside surprise will validate the argument that an economic recovery is, indeed, talking place."

Meanwhile, some continued to be optimistic over the jobs recovery.

“There may be seasonal fluctuations, but overall, we’ll continue to see improvement in jobs,” said Zahid Siddique, associate portfolio manager of Gabelli Equity Trust. “Europe still remains a wildcard…they could have an impact in the U.S. but we think we can still avoid a recession despite the problems.”

The jobs news was also trumped by ongoing worries over the euro zone. The euro briefly dipped below $1.27 against the dollar, hit a 16-month low as investors remained cautious over sovereign funding issues.

Fitch lowered Hungary's credit rating to "junk" status, emphasizing the government's reluctance to change its controversial policies in return for aid to stave off a financial crisis.

Euro zone banks slumped amid fears relating to their ability to raise cash in the market, as well as the huge sovereign refinancing needs of the region's countries.

French President Nicolas Sarkozy and German Chancellor Angela Merkel are scheduled to meet in Berlin next Mondayand are likely to discuss measures to enforce budget discipline among the EU members to help stave off the ongoing euro zone crisis.

Among U.S. financials, Goldman Sachs was downgraded by Wells Fargo to "market perform" from "outperform." In addition, JPMorgan cut its price target on the stock and Bernstein forecast a challenging year for the firm.

Citigroup's effort to sell its OneMain consumer lending unit to private equity buyers has ended without a deal, the Wall Street Journal reported.

Alcoa fell after the aluminum producer said it will cut its global smelting capacity by 12 percent, becoming the first producer to take direct action to cut costs amid a steep drop in metal prices. It will take a charge of 15 to 16 cents per share for its fourth quarter as a result, pushing it to a loss.

Alcoa posts earnings next Monday, unofficially kicking off the fourth-quarter earnings season. JPMorgan is slated to report next Friday.

Boeing lost the 2011 order race by a wide margin and lagged European rival Airbus on deliveries for the ninth year in a row. It said it would fight back in 2012 with big sales of a revamped narrowbody.

Best Buy posted a 1.2 percent decline in same-store sales, but shares of the electronic retailer gained after the firm reaffirmed its outlook.

Meanwhile, Netflix soared to lead the S&P 500 gainers, on speculation the online movie-streaming company could be a possible takeover a target. The firm is up over 23 percent this week, logging its biggest percentage gain since October 2008.

—Follow JeeYeon Park on Twitter: twitter.com/JeeYeonParkCNBC

Coming Up Next Week:

MONDAY: Atlanta Fed Pres Dennis Lockhart speaks, consumer credit, Sarkozy/Merkel meet; Earnings from Alcoa
TUESDAY: NFIB small biz optimism index, wholesale trade, San Francisco Fed Pres John Williams speaks, Kansas City Fed Pres Esther George speaks, 3-yr note auction, New Hampshire Primary
WEDNESDAY: Weekly mortgage apps, Atlanta Fed Pres Dennis Lockhart speaks, oil inventories, Philadelphia Fed Pres Charles Plosser speaks, 10-yr note auction, Beige Book, Monti/Merkel meet; Earnings from Lennar, Chevron interim results
THURSDAY: BoE announcement, ECB announcement, jobless claims, retail sales, business inventories, 30-yr bond auction
FRIDAY: International trade, import & export prices, consumer sentiment, Richmond Fed Pres Jeffrey Lacker speaks; Earnings from JPMorgan

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