By Wallace Witkowski, MarketWatch , Ryan Vlastelica

Fewer jobs added in November than had been expected

U.S. stocks struggled for direction Friday as investors looked past a weaker-than-expected payroll report to focus on a market uptrend that appeared intact, though they favored the sectors of the economy that are viewed as safest in economically uncertain times.

Trading was volatile, with major indexes fluctuating between positive and negative territory throughout the session. The favoring of defensive names underlined how market participants seem torn between growth expectations and current levels of valuations.

Wall Street has rallied over the past three weeks, with major indexes hitting a series of records since the U.S. presidential election. Investors are betting that President-elect Donald Trump will advocate for policies, including massive tax cuts and deregulation, that could accelerate economic growth. Although that view hasn't diminished, and few see the bull market's days as numbered, it may be difficult for investors to justify current market levels, given how long it may take for the impact of any new policies to translate into corporate profits.

"The market has been rising on expectations that things will get better in terms of government policy. As it will take time for those changes to come out of the government and show up in corporate earnings, it is safe to say we've come too far too fast, even while the trajectory is still there," said Bruce McCain, chief investment strategist at Key Private Bank.

Defensive sectors, namely real estate, utilities, consumer staples, and health care were among the biggest outperformers of the day, with the S&P real-estate sector up 1.5%. So-called defensive sectors tend to draw buyers during times of uncertainty because they offer comparatively higher dividends, as opposed to high levels of growth.

The uncertainty was underlined by the November jobs report (http://www.marketwatch.com/story/us-jobless-rates-hits-nine-year-low-of-46-in-november-2016-12-02), which showed 178,000 jobs added in the month, fewer than had been expected, while the count over the prior two months was reduced. However the jobless rate fell sharply, to a nine-year low of 4.6%.

While the number of new jobs pointed to a labor market that continues to improve, it also suggested a moderation in growth, although one not severe enough to influence the expectation that the Federal Reserve would raise interest rates in December.

The Dow Jones Industrial Average was flipping between gains and losses, and was most recently down 39 points, or 0.2%, at 19,153. The blue-chip average was led lower by shares of Goldman Sachs Group Inc.(GS) and American Express Co.(AXP)

The S&P 500 shed 1 point to 2,190, and the Nasdaq Composite Index was up less than a point at 5,251.

For the week, the S&P 500 is down 1.1% while the Nasdaq, which has lately been pressured by weakness in both technology and biotech stocks, is down 2.7%, on track for its worst weekly decline the one before the Nov. 8 election, according to FactSet data. The Dow is off less than 0.1%; the blue-chip index closed at a record on Thursday.

The Russell 2000 index , which has been one of the biggest gainers of the postelection rally, is down 2.3% for the week, which would represent the small-cap gauge's worst weekly fall since the final week of October.

Read:November unemployment rate drop 'not all good news,' say economists (http://www.marketwatch.com/story/november-unemployment-rate-drop-not-all-good-news-say-economists-2016-12-02)

Outside the U.S., there was caution ahead of the Italian constitutional-reform referendum (http://www.marketwatch.com/story/if-italy-votes-no-in-sundays-referendum-do-this-says-strategist-2016-12-01) on Sunday, which analysts fear could trigger a new wave of financial jitters in the eurozone. If Italian voters reject the proposals--and polls point toward this outcome--it could lead to resignation of Italian Prime Minister Matteo Renzi, as well as the dissolution of Italy's government.

While that vote could potentially roil international markets, Randy Frederick, managing director of Trading & Derivatives at Schwab Center for Financial Research, played down the effect it may have on U.S. stocks given that domestic markets have largely digested a neutral jobs report and a December Fed rate hike is all but a certainty.

"The Italian vote probably won't have an impact either way, our market will largely shrug it off," Frederick said.

Movers and shakers: Shares of Starbucks Corp.(SBUX) fell 2.4% a day after the coffee chain said Howard Schultz will be stepping down as chief executive in April (http://www.marketwatch.com/story/starbucks-shares-fall-on-announced-ceo-departure-2016-12-01).

Shares of Ulta Salon Cosmetics & Fragrance Inc.(ULTA) sank 1.1% despite the beauty-store chain lifting its outlook for the year late Thursday (http://www.marketwatch.com/story/ulta-salon-lifts-full-year-outlook-again-2016-12-01).

Discount retailer Big Lots Inc.(BIG) rose 1% after lifting its full-year adjusted profit outlook (http://www.marketwatch.com/story/big-lots-posts-surprise-revenue-decline-2016-12-02). The stock had previously traded sharply higher on the day.

Vascular Solutions Inc.(VASC) rose 1.6% following news it will be taken over by Teleflex Inc.(TFX) in a deal valued at $1 billion (http://www.marketwatch.com/story/vascular-to-be-bought-by-teleflex-in-a-1-billion-deal-2016-12-02). Teleflex shares jumped 4.6%.

Other markets:Asian stocks were lower on Friday (http://www.marketwatch.com/story/nikkei-pulls-back-from-record-high-as-trump-effect-fades-2016-12-02), while European stocks traded 0.4% lower (http://www.marketwatch.com/story/european-stocks-at-3-week-low-on-italy-worries-lower-oil-prices-2016-12-02), with investors staying cautious ahead of Italy's referendum.

Read:If Italy rejects Renzi's reforms, then this is how to play stocks, says J.P. Morgan strategist (http://www.marketwatch.com/story/if-italy-votes-no-in-sundays-referendum-do-this-says-strategist-2016-12-01)

Crude oil (http://www.marketwatch.com/story/oil-prices-edge-lower-as-investors-assess-what-opec-oil-deal-can-deliver-2016-12-02) rose 0.8%, extending its recent advance. The commodity has soared more than 10% this week, putting it on track for its biggest weekly gain since August 2015 following an agreement by OPEC to cut product, a move that is seen as necessary to stabilizing prices.

The ICE dollar index was down 0.4% at 100.69 (http://www.marketwatch.com/story/dollar-edges-down-before-us-releases-monthly-jobs-report-2016-12-02), while gold (http://www.marketwatch.com/story/gold-firms-pausing-sharp-dollar-driven-slide-2016-12-02) rose 0.7%, supported by the weaker dollar.

--Sara Sjolin in London contributed to this article.

(END) Dow Jones Newswires

December 02, 2016 13:33 ET (18:33 GMT)

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