Wall Street Shows Mettle - TheStreet

Updated from 4:13 p.m. EDT

Stocks shook off early weakness and closed higher Friday, as traders overlooked another climb in bond yields and the continuing advance in crude prices.

The

Dow Jones Industrial Average

rose 45.84 points, or 0.34%, to 13,611.68. The

S&P 500

was up 5.04 points, or 0.33%, at 1530.44, and the

Nasdaq

tacked on 9.86 points, or 0.37%, at 2666.51.

Despite an abbreviated trading session Tuesday and the Independence Day holiday on Wednesday, the major averages managed modest gains for the week. The Dow rose 1.5%, the S&P 500 added 1.8%, and the Nasdaq finished the week higher by 2.4%.

The news of the day was the employment report, one of the most important pieces of data the government releases every month. The numbers showed that 132,000 workers joined nonfarm payrolls in June, whereas economists had expected 125,000 positions to have been created.

The jobless rate remained at 4.5%, and average hourly earnings, a key inflation metric, rose 0.3%. Both matched consensus estimates.

However, job growth for the prior two months was revised sharply upward. The government now says 75,000 more employees were put to work in April and May than had been first thought.

"This report is quite strong, when adding in the revisions to previous months," said Peter Cardillo, chief market economist with Avalon Partners. "This is good momentum for the economy as we leave the second quarter. This report shows solid growth."

Bond yields jumped early before pulling back slightly, although they still indicated that fixed-income traders view the jobs data as diminishing the chance of a near-term rate cut. The 10-year Treasury was down 13/32 in price, yielding 5.20%, and the 30-year bond was lower by 20/32, yielding 5.27%.

"Initially, the revisions to previous months pushed bond yields higher. This was an issue early on, but now traders are looking at this and considering that it's not necessarily due to an inflationary problem but instead a stronger economy," said Paul Mendelsohn, chief investment strategist with Windham Financial. "There's light volume following the holiday, and that might have something to do with the volatility today."

Paul Nolte, director of investments with Hinsdale Associates, said that while the Fed has remained on the sidelines instead of raising or cutting rates, the move in the bond market has essentially done the work for them.

"After a bit of a swoon late in February, stock prices took flight through May, under the impression that as long as nothing happens, prices should rise," he said. "However, the rumblings of the first half may turn to all-out shouting in the second."

The data came just hours after Janet Yellen, president of the

Federal Reserve

Bank of San Francisco, said during a speech that the central bank's main concern should remain inflation, continuing the theme that other officials have stressed for months.

She also indicated that keeping rates steady would allow for growth and at the same time prevent prices from rising too far, too fast.

The Fed has left its target fed funds rate at 5.25% since June 2006. When this year started, many on Wall Street were looking for at least one reduction, but six months of data have failed to show convincingly that the economy has been suffering because of the current interest rate environment. Therefore, policymakers have been in a holding pattern.

Breadth improved from the prior day's weak levels. About 2.45 billion shares changed hands on the

New York Stock Exchange

, as advancers topped decliners by a 5-to-3 margin. Volume on the Nasdaq reached 1.65 billion shares, with winners outpacing losers 3 to 2.

Crude prices were on the rise again. Oil added $1 to close the week at $72.81 a barrel, its highest close since September. Natural gas lost 18 cents to $6.44 per million British thermal units after the latest inventory report.

Gold was higher by $4.20 to $654.80 an ounce, and silver added 18 cents to close at $12.75 an ounce.

As for the corporate side,

Microsoft

(MSFT) - Get Report

said it would record a pretax charge of up to $1.15 billion in order to expand the warranty coverage for its Xbox 360 game consoles.

The company made the move because it has seen an "unacceptable number" of calls for repairs, and it said the warranty will go from one year to three years. Shares of Microsoft eased by 2 cents, or 0.1%, to $29.97.

Elsewhere,

Advanced Medical Optics

(EYE) - Get Report

has offered to buy

Bausch & Lomb

( BOL) for $75 a share, or more than $4 billion in total. The proposal is higher than a deal Bausch signed with private equity firm Warburg Pincus earlier this year.

Advanced Medical Optics dipped 0.1% to close at $35.85. Bausch & Lomb finished flat at $72.

Among analyst actions, Deutsche Bank upgraded

Royal Dutch Shell

(RDS.A)

to buy from hold. Several firms cut their ratings on

Hilton

(HLT) - Get Report

, saying they don't expect competing bids to emerge for the hotel chain.

Royal Dutch Shell added $2.29, or 2.8%, to $85.18. Despite the downgrades, Hilton managed to gain 32 cents, or 0.7%, to $45.71.

Overseas, Tokyo's Nikkei gave back 0.4%, and Hong Kong's Hang Seng advanced 1.3%. London's FTSE rose 0.8%, and Frankfurt's DAX was better by 0.7%.