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Stocks also will begin to lose the support they've enjoyed from stronger-than-expected earnings since the first-quarter reporting period is almost at an end.

The drop in commodities this week spilled over into commodity-related stocks, which were among the top performers in the last two quarters.

The Standard & Poor's energy index .GSPE ended the week down 7 percent, its biggest weekly drop in a year, and the iShares Silver Trust (SLV.P) suffered its worst week of outflows ever after heavy losses in the precious metal.

While the commodities rout may be done for now, it has left many investors worried about the ramifications.

"It's hard to pinpoint the time when the bubble bursts and hard to go against the current, but when it bursts it's precipitous usually," said Natalie Trunow, senior vice president and chief investment officer of equities at Calvert Asset Management Company in Bethesda, Maryland, which manages about $14.8 billion in assets and is underweight energy.

With first-quarter earnings and also the Federal Reserve's QE2 purchasing program coming to an end, the stock market could be vulnerable to some weakness in the short term, she said.

"I wouldn't be surprised if we had a somewhat softer summer or somewhat softer next couple of months," said Trunow, who said she is still positive on the U.S. market longer-term.

The S&P 500 .SPX suffered its worst week since March, even with Friday's surprisingly strong jobs report that allowed the index to end a four-day losing streak.

It is now just above critical support at 1,330. A close below that level could "turn the intermediate-term picture bearish," according to a note from Larry McMillan, president of McMillan Analysis Corp.

SENTIMENT STILL UPBEAT

Despite this week's skittishness, sentiment for the market is positive longer term, and technical indicators do not suggest the market is overbought.

"Our view is still unchanged; we still like the market," said Jeff Rubin, market strategist at Birinyi Associates in Westport, Connecticut.

Much of the fundamental picture remains bullish for stocks, said Hank Smith, chief investment officer at Haverford Trust Co. in Philadelphia.

"The economy and valuations remain attractive," he said. "We remain bullish, but with any bull market, it's healthy to have pullbacks."

Friday's Labor Department report, which showed U.S. employment increase more than expected in April and U.S. companies created jobs at the fastest pace in five years, gave evidence of the underlying strength in the economy, analysts said.

But labor has been among the weakest areas, and next week's jobless benefits claims and retail sales data will be watched for further clues on the jobs picture and health of consumer spending.

In earnings news, a number of retailers are expected to report next week, including Macy's (M.N), Nordstrom (JWN.N) and Kohl's (KSS.N).

Earnings estimates have risen since the start of the reporting period. Profits for S&P 500 companies are now expected to have climbed 18 percent in the first quarter from the year before, up from an estimated 13 percent rise at the start of April, according to Thomson Reuters data.

Of the 438 S&P 500 companies that have reported so far, 69 percent have beaten analyst earnings expectations. That's roughly in line with the high rate of beats seen in recent quarters.

Adding to nervousness, a small group of European finance ministers were meeting to discuss the euro zone debt crisis, and Greece denied a media report speculating the country was considering leaving the euro zone.

The speculation caused stocks to trim some of their gains on Friday.

Friday marked the one-year anniversary of Wall Street's "flash crash" when prices suddenly plunged and nearly $1 trillion was wiped off U.S. stocks' value in a matter of minutes before the market bounced back.

The crash shook many investors' confidence, but the market regained steam and has rallied since about the start of September.

The S&P 500 is up about 28 percent since then.

(Additional reporting by Doris Frankel, Editing by Kenneth Barry)

U.S. nonfarm payrolls rose by 244,000 in April, the most in 11 months, the Labor Department said on Friday, well above economist' expectations for an increase of 186,000.

"Surprisingly good, strong number here -- this reminds everyone that we are still on the path of recovery," said Jeff Kleintop, chief market strategist at LPL Financial in Boston.

"This might even put a bid back in commodities which have suffered so tremendously this week on the fear that there is no more need for an inflation hedge."

U.S. crude oil futures, which had slumped on Thursday after a batch of soft economic data during the week, pared early losses and fell 0.4 percent to $99.44 a barrel. ICE Brent futures rose 0.2 percent to $111.01.

Exxon Mobil Corp (XOM.N) rose 0.9 percent to $83.39 and Chevron Corp (CVX.N) gained 0.7 percent to $103.36. The PHLX Oil service sector index .OSX climbed 1.7 percent.

The Dow Jones industrial average .DJI gained 127.49 points, or 1.01 percent, to 12,711.66. The Standard & Poor's 500 Index .SPX rose 13.43 points, or 1.01 percent, to 1,348.53. The Nasdaq Composite Index .IXIC climbed 25.82 points, or 0.92 percent, to 2,840.54.

Friday marks the one-year anniversary of the "flash crash" on Wall Street, when the Dow lost nearly 700 points in minutes.

The CBOE volatility index ., dropped 8.8 percent to 16.60 after closing at its highest level on Thursday since March 28.

Gaines were also seen in materials-related stocks, with the S&P Materials index .GSPM up 2 percent, led by a 3.1 percent rise in mining company Freeport-McMoRan Copper & Gold (FCX.N) to $51.33.

The benchmark S&P 500 had fallen 2.1 percent this week, before Friday's advance, culminating in a drop in commodity prices on Thursday as concerns rose over deteriorating demand.

(Editing by Padraic Cassidy)

Private sector hiring, including a big jump in the retail sector, boosted overall nonfarm payrolls by 244,000, the largest increase in 11 months, the Labor Department said, beating economists' expectations for a 186,000 gain.

The private sector job gains of 268,000 were the biggest since February 2006 and accounted for all the jobs created last month. The data was supportive of views the economic recovery would regain speed this quarter after stumbling in the first three months of the year on high food and energy prices.

The data also contrasted with signs of slowing in the labor market.

"We're getting close to the point where we are seeing sustainable job growth. That creates income that generates spending and, hopefully, more jobs," said Gary Thayer, chief macro strategist at Wells Fargo Advisors in St. Louis, Missouri.

"We still have a lot of people unemployed. That holds things back," he said.

SEVEN STRAIGHT MONTHS OF JOB GAINS

The U.S. economy has now created jobs for seven straight months, but gains have been too meager to make much of dent on the pool of 13.7 million Americans out of work.

Figures for the previous two months were revised to show 46,000 more jobs added.

The unemployment rate backed away from a two-year low of 8.8 percent. It is derived from a separate survey of households, which showed a decline in employment and a modest rise in the size of the labor force.

U.S. stock index futures extended gains, while U.S. bond prices extended losses. The dollar rose further against the euro and yen.

The unemployment rate has dropped a full percentage point since November and the latest rise will strengthen the Federal Reserve's resolve to stick to its ultra-easy monetary policy stance.

The Fed last month signaled it was in no hurry to start withdrawing its massive stimulus for the economy, even as other major central banks around the world have begun to raise interest rates.

"To us it looks like a good recovery taking place in payrolls. We think employment is recovering strongly and will continue to do so throughout 2011," said Michael Shaoul, chairman of Marketfield Asset Management in New York.

High gasoline and food prices clipped U.S. economic growth in first quarter. The economy grew at a 1.8 percent annual rate after expanding at a 3.1 percent clip in the final three months of last year.

The economy has recovered only a fraction of the more than 8 million jobs lost in the 2007-2009 recession. Job growth of between 250,000 and 300,000 a month is needed to make significant strides in reducing unemployment.

Details of the April employment report were generally upbeat with the exception of government employment, which contracted for a sixth straight month in April, shedding 24,000.

The bulk of gains in payrolls last month were in the private services sector, which added 224,000 after 194,000 jobs March. Within that segment, retail saw a surge of 57,100 jobs and leisure and hospitality added 46,000 positions.

Employment in the goods-producing industries increased 44,000, with construction payrolls climbing by 5,000 and manufacturing hiring gaining 29,000, adding to the 22,000 jobs created in March.

The employment report also showed the average workweek unchanged at 34.3 hours for a third straight month and no sign of wage inflation, with average hourly earnings rising a mere 3 cents.

(Reporting by Lucia Mutikani; Editing by Neil Stempleman)