U.S. MARKET AVERAGES

U.S. averages extended rally Friday, lifted by disappointing job growth in December which was interpreted by traders as a sign that the Fed Reserve will stop rate hikes. Broker’s higher earnings estimates for Google and Yahoo Inc. also provided support. The technology giant IBM Corp. supported the Dow component.

The Labor Department released payrolls data, showing 108,000 gain in payrolls registered in December. Figures came far below analyst expectations of non-farm payrolls to rise by 215,000 in December and November's growth of 305,000. The unemployment rate slightly declined to 4.9% from 5%.

IBM announced it would be freezing its U.S. pension plan, starting in 2008.

Microsoft was downgraded by Credit Suisse First Boston to neutral from outperform, with the broker saying the stock only is 10% shy of its price target.

J.P. Morgan upgraded Yum Brands Inc., the restaurant group that includes Pizza Hut and KFC, to overweight from neutral.

Homebuilders M.D.C. Holdings and Brookfield Homes reported declines in fouth-quarter home orders, raising concerns that the housing industry is weakening.

The gold sector was one of the most notable movers to the upside with a gain of about 3%. Energy stocks extended gains with he oil service sector reaching a new high with a 2.8% advance.

Transportation and housing stocks were the most notable decliners of the day. The HMO sector moved modestly below the unchanged mark, erasing earlier gains.

Accenture (ACN: chart) jumped to a new 52-week high on better-than-expected Q1 earnings and raised full-year guidance. Google (GOOG: chart) set a new peak, building on recent gains. Broadcom (BRCM: chart) and SanDisk (SNDK: chart) also set fresh highs.

Dollar General (DG: chart) dropped to a 52-week low on a downgrade from Bear Stearns, extending losses on lowered Q4 guidance. Delta & Pine Land (DLP: chart) broke to a new low on quarterly results and guidance.

In late morning trading, the Dow gained 15.37, or 0.14%. The S&P 500 was up 4.02, or 0.32%, at 1,277.50, and the Nasdaq rose 7.66, or 0.34%.

Bonds extended their decline, with the yield on the 10-year Treasury note rising to 4.37% from 4.36% Thursday.

MOVERS AND SHAKERS

International Business Machines Corp. (IBM: chart) announced a plan to freeze its current pension plan in order to save millions of dollars. The stock gained 1.9%.

Goldman Sachs raised its implied value estimate for Google Inc. (GOOG: chart) to $500 from $400 on higher earnings expectations. The stock rose 2%.

CalAmp Corp (CAMP: chart), wireless equipment company, reported Q3 earnings of $5.44 million, or 23 cents a share, compared with $1.79 million, or 8 cents a share a year ago, exceeding estimates of 19 cents a share. However, the reported quarterly revenue of $64.5 million, compared with $57.1 million last year, came below expectations of $65 million. The company’s shares dropped 10%.

Avanex Corp (AVNX: chart) cut its estimate for Q2 revenue to a range of $35 million to $37 million from its previous expectation of $41 million to $45 million, reflecting the company''s closure of its Erwin Park, N.Y., manufacturing facility in early December and transfer of manufacturing to a contract manufacturer. The stock dropped 18.5%.

ECONOMIC NEWS

The Department of Labor released its closely watched report on U.S. employment in the month of December on Friday, showing weaker than expected growth. At the same time, the report also showed a significant upward revision to November employment growth.