NEW YORK (TheStreet) -- The major U.S. equity averages finished a banner week with mild gains on Friday, extending multi-year highs, as investors looked ahead to the potential for more stimulus next week from the Federal Reserve.

While a weak August employment report engendered some disappointment that the U.S. economy wasn't able to build on the previous month's strong job creation, the shortfall in nonfarm payrolls also reinforced the perception that the central bank will unveil plans for another asset purchase program at its next policy meeting on Sept. 12-13.

Even a warning from chip giant Intel ( INTC) wasn't enough to spark a round of profit-taking after Thursday's robust rally on enthusiasm about the European Central Bank's own bond-buying plan.

The Dow Jones Industrial Average closed up nearly 15 points, or 0.11%, at 13,306.64, the best finish since December 2007. The blue-chip index is now up 8.91% in 2012 after surging 1.6% this past week.

Breadth was even within the Dow. The biggest percentage gainers were Alcoa ( AA), Bank of America ( BAC), and Caterpillar ( CAT).

The weakest performers were Cisco ( CSCO), Intel, Kraft Foods ( KFT), and Wal-Mart Stores ( WMT).

Intel shares were off nearly 4% after the world's biggest semiconductor company lowered its third-quarter revenue outlook, citing weaker than expected demand in a challenging macroeconomic environment.

Kraft's stock dropped more than 5% after the company failed to impress Wall Street with the post-split outlook for its grocery business spin-off.

The S&P 500 rose nearly 6 points, or 0.40%, to finish at 1438. The index gained 2.2% on the week and is now up 14.34% year-to-date and sitting at closing levels unseen since January 2008.

Held back by Intel, the Nasdaq added less than a point, or 0.02%, to settle at 3136.42, another best closing level in more than decade. The index tacked on 2.3% for the week and is up 20.39% this year.

Apple ( AAPL) shares hit a new all-time high during the session, as did Amazon ( AMZN), which rose more than 3% a day after unveiling well-received updates to its Kindle e-reader and Kindle Fire tablet product lines.

Basic materials, consumer cyclicals and energy were the strongest sectors in the broad market, while health care, consumer non-cyclicals and utilities were in the red.

Volume reached 3.70 billion on the Big Board and 1.74 billion on the Nasdaq.

The Bureau of Labor Statistics said Friday that 96,000 jobs were added to the U.S. work force in August, far below the addition of 125,000 jobs that economists were expecting. Meanwhile, the report showed that the unemployment rate edged down to 8.1%, mainly because of a lower labor force participation rate, i.e. people halting their employment searches. Economists had expected the unemployment rate to stay at 8.3%.

"The unemployment rate improved in August ... for the wrong reasons," said Russell Price, senior economist at Ameriprise Financial.

Revisions to previous months hurt jobs growth by a total of 41,000.

"With job growth returning to a double-digit pace, we believe those on the FOMC inclined to ease further will see their case bolstered sufficiently," said Dan Greenhaus, chief global strategist at BTIG.

"But we doubt the FOMC, which is dominated by those who view further easing favorably, will want to 'wait and see.' As such, we increase our odds of a third asset purchase program in September to 90% from more than 50% previously."

"QE3 is a done deal," said Greenhaus.

In August, average hourly earnings for all employees on private nonfarm payrolls edged down by 1 cent to $23.52. Hourly earnings were forecast to have risen 0.2%.

The average workweek for all employees on private nonfarm payrolls was unchanged at 34.4 hours in August

Ameriprise's Price said if the market does not get a large scale bond purchase program out of next week's FOMC meeting, it can still expect an extension of the period over which the committee expects to maintain its target range for the federal funds rate at 0 to ¼ percent, and voting members to indicate an increased likelihood of another round of large-scale bond-purchases such as QE3 if economic weaknesses persist.

Price believes the language coming out the meeting will become open-ended, amounting to "as long as it takes."

The FTSE in London closed up 0.3%, while the DAX in Germany settled up 0.66%. The Hong Kong Hang Seng index finished up by 3.09% and the Nikkei in Japan closed up 2.2%. The gains followed China's approval this week of 60 infrastructure projects valued at more than 1 trillion yuan ($157 billion), or 2.1% of the country's gross domestic product, and data showing a gain in both exports and imports in Germany, the eurozone's largest economy.

The benchmark 10-year Treasury rose 4/32, diluting the yield to 1.671%. The greenback dove 1.18%, according to the dollar index, hitting a four-month low.

October crude oil futures rose 89 cents to settle at $96.42 a barrel and December gold futures soared $34.90 to settle at $1740.50 an ounce.

On the corporate front Friday, Smith & Wesson ( SWHC), the gun maker, posted fiscal first-quarter net income from continuing operations of $18.9 million, or 28 cents a share, on revenue of $136 million, topping the estimates of Wall Street analysts.

The company also lifted its outlook for the fiscal year ending in April 2013, forecasting earnings of 85 to 90 cents a share on revenue ranging from $530 million to $540 million. Shares rose nearly 12%.

Lululemon Athletica ( LULU) shares were surged more than 12% after the designer and retailer of technical athletic apparel boosted its full-year outlook after reporting better-than expected second-quarter earnings of 34 cents a share on revenue of $282.6 million. Same-store sales increased 15%. Analysts, on average, were expecting earnings of 31 cents a share on revenue of $282.76 million.

Dell's ( DELL) board approved the PC maker's first-ever quarterly payout of 8 cents a share, payable on Oct. 22 to shareholders of record on Oct. 1. Shares added 1.1%.

The aforementioned Apple was in the news as well. The iPhone maker is reportedly in talks to license music for a custom-radio service similar to the one operated by Pandora Media ( P). The Wall Street Journal report sent shares of Pandora down nearly 17%.

Apple was also negatively impacting Audience Inc ( ADNC), whose shares plummeted more than 63% after the company said it now believes Apple is unlikely to use its processor intellectual property in its next generation mobile phone.


--Written by Andrea Tse in New York.

>To contact the writer of this article, click here: Andrea Tse.

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