The positive jobs data gave stocks a boost, but the gains were eroded by a jump in wholesale inventories and more evidence of subprime mortgage problems. Lending worries were a big factor in the market's drop.

The Labor Department said that in February, the unemployment rate fell to 4.5 percent from 4.6 percent in February, U.S. employers added 97,000 nonfarm workers, and wages rose. But the Commerce Department's report of a 0.7 percent increase in wholesale inventories in January pointed to a drop in demand and possible economic weakness.

Investors were also uninspired by speeches by Federal Reserve officials in the afternoon. Susan Bies, an outgoing member of the Fed's rate-setting committee, said the economy is strong and job creation is "incredible," but that the troubles with the subprime lending market could escalate. Meanwhile, the Fed's main hawk, Jeffrey Lacker, said that inflation expectations aren't anchored enough.

Strength in the job market did help calm investors who feared that the economy might slow too abruptly, but it didn't erase the skittishness in the market, which last week had its worst week in four years.

"Generally, most people are still concerned that this downdraft is not over," said Doug Johnston, head of U.S. trading at Canaccord Adams in Boston. He said that while most economic data and corporate earnings have shown decent growth, investors are still spooked after last week's dive. "The marketplace itself is an emotional animal."

DOW ENDS DAY UP

According to preliminary calculations, the Dow Jones industrial average rose 15.62, or 0.13 percent, to 12,276.32, after trading in both positive and negative territory over the course of the day.

Broader stock indicators were mixed. The Standard & Poor's 500 index rose 0.96, or 0.07 percent, at 1,402.85, while the technology-dominated Nasdaq composite index fell 0.18, or 0.01 percent, to 2,387.55.

Treasury bond prices fell sharply, as the jobs report made it more unlikely the Federal Reserve would lower rates. Though the report was slightly weaker than expected, bond investors had been positioned for an even softer number. The yield on the benchmark 10-year Treasury note shot up to 4.59 percent from 4.51 percent late Thursday.

Advancing issues outnumbered decliners by about 3 to 2 on the New York Stock Exchange, where volume came to 1.44 billion shares, down from 1.65 billion shares at the same point on Thursday.

The Russell 2000 index of smaller companies was up 3.98, or 0.51 percent, at 785.12.

With little energy-related news to trade on, oil prices dropped as traders took profits ahead of the weekend. Light, sweet crude fell $1.59 to $60.05 a barrel on the New York Mercantile Exchange.

Gold prices slipped, while the dollar rose against the euro and the yen.

Overseas, Japan's Nikkei stock average closed up 0.43 percent and China's Shanghai Composite Index gained 0.3 percent. Britain's FTSE 100 was up 0.28 percent, Germany's DAX index rose 0.05 percent, and France's CAC-40 climbed 0.25 percent.

DIRECTIONLESS TRADING CAPS VOLATILE WEEK

Also supporting stocks today was a Commerce Department report that the trade deficit narrowed slightly in January as U.S. exports rose to an all-time high while imports dropped. This sent a good signal that the nation's trade imbalances may finally start to improve this year.

Today's data, though it didn't fuel large gains, calmed the markets enough to stick to a relatively narrow range. Today's directionless trading capped a volatile week that saw the Dow drop near the 12,000 mark on Monday, then rally back as global stock markets recovered. The Dow is up 0.13 percent on the week; the S&P 500 is up 1.13 percent; and the Nasdaq is up 0.83 percent.

"It was a good comeback. Let's see what other economic data comes out, as the days and weeks go by," said Stephen Carl, principal and head of equity trading at The Williams Capital Group. "Barring anything out of the ordinary, I think the market's going to hang in there OK."

If next week's inflation data comes in high, however, it might reduce the chance that the Fed will lower rates later in the year, and may even raise the chance of a rate hike — a move that could hurt stocks.

"It's turning back into a 'What's the Fed going to do?' kind of game," said Scott Merritt, U.S. equity strategist at JPMorgan Asset Management.

TROUBLES FOR SUBPRIME LENDERS

The market is also still dogged by troubles for subprime lenders, who lend money to people with poor credit ratings. Worries about rising defaults have led some financial backers to avoid the market, and Fed governor Bies said the problems are narrow now, but may just be starting.

One of the struggling lenders has been New Century Financial Corp., which plunged 66 cents, or 17 percent, to $3.21. The subprime lender announced late Thursday it will stop accepting loan applications as some of its financial backers refused to provide access to financing.

Other companies involved in subprime lending fell, too; Fremont General Corp. dropped 31 cents, or 3.7 percent, to $8.03, while Novastar Financial Inc. fell 17 cents, or 3.1 percent, to $5.24.

Homebuilders also weakened, in light of the subprime mortgage concerns and Hovnanian Enterprises Inc.'s financial results late Thursday. The company swung to a loss in the first quarter, signaling that the sluggishness in the housing market is far from over. Hovnanian fell $1.26, or 4.1 percent, to $29.34.

Meanwhile, Yahoo Inc. tumbled $1.59, or 5.2 percent, to $29.12 after a report said AT&T Inc. wants to scale back its partnership with the Web portal. The move could cut $200 million to $250 million a year for Yahoo, according to The Wall Street Journal.

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