* Jan jobs growth below forecasts, but Dec revised higher
* Merck shares fall after tepid full-year outlook
* Dell shares soar, sources say co nears buyout
* Indexes up: Dow 0.8 pct, S&P 0.7 pct, Nasdaq 0.7 pct
NEW YORK, Feb 1 (Reuters) - U.S. stocks rose on Friday, with indexes turning positive for the week as the latest payroll report indicated the economic recovery remained on track.
Employment grew modestly in January, with 157,000 added in the month, slightly below expectations for 160,000. Still, figures for both November and December were revised upwards, supporting views the economy continues to improve despite a surprise contraction in fourth-quarter gross domestic product.
"What was really positive was significant revisions up," said Darrell Cronk, regional chief investment officer for Wells Fargo Private Bank in New York. "Particularly in the face of the fiscal cliff and everything that was going on at that time that corporate America would just hit the pause button in those moments, those are some pretty impressive numbers."
With the day's gains, major averages erased their losses for the week, putting them on track for a fifth straight week of gains. The S&P 500 is also coming off its best monthly performance since October 2011.
U.S. consumer sentiment unexpectedly improved last month, rising more than expected to 73.8.
The pace of growth in the U.S. manufacturing sector picked up in January to its highest level in nine months, according to the Institute for Supply Management, which said its index of national activity rose to 53.1 from 50.2 the previous month. December construction spending also came in higher than forecasts, rising 0.9 percent in the month.
Corporate earnings were also in focus, with a trio of Dow components reporting profits that beat expectations.
Exxon Mobil Corp dipped 0.6 percent to $89.46 after its results while Chevron Corp was flat at $115.24.
On the downside, drugmaker Merck & Co fell 3.4 percent to $41.76 after a cautious 2013 outlook.
Of the 231 companies in the S&P 500 reporting earnings so far, 69.3 percent have exceeded expectations, according to Thomson Reuters data through Thursday morning. That is a higher proportion than over the past four quarters and above average since 1994.
Overall, S&P 500 fourth-quarter earnings rose 3.7 percent, according to the data, above a 1.9 percent forecast at the start of the earnings season but well below a 9.9 percent profit growth forecast on Oct. 1.
The Dow Jones industrial average was up 114.67 points, or 0.83 percent, at 13,975.25. The Standard & Poor's 500 Index was up 10.32 points, or 0.69 percent, at 1,508.43. The Nasdaq Composite Index was up 21.01 points, or 0.67 percent, at 3,163.14.
For the week, the Dow is up 0.7 percent, the S&P is up 0.5 percent and the Nasdaq is up 0.6 percent, putting all three on track for a fifth straight week of gains.
The S&P advanced 5.1 percent in January, its best monthly performance since October 2011, with gains driven by a sturdy start to the earnings season and a compromise in Washington that postponed the impact of a "fiscal cliff" of automatic spending cuts and tax hikes that were due to take effect early this year.
Dell Inc was the S&P's top percentage gainer, rising 5 percent to $13.91 after sources said the company was nearing an agreement to sell itself to a buyout consortium led by its founder and Chief Executive Michael Dell and private equity firm Silver Lake Partners. The sources said a deal could possibly be announced as early as Monday.
Shares of Zoetis surged in their trading debut after the company's initial public offering was priced at $26, above the expected range. After spiking as high as $31.50, it pared its gains to trade at $30.51.