Jobs data lifts blue chips; Nasdaq dips on Sun

NEW YORK (Reuters) - Stocks made modest gains on Friday after jobs data that offered fresh evidence the economic slowdown is not as severe as feared, but technology shares faded on a surprise loss from Sun Microsystems Inc (JAVA.O).

The government's stronger-than-expected April payrolls report helped oil stocks rebound sharply by easing fears about weaker U.S. demand for energy. Adding to the energy rally were higher-than-expected profit from Marathon Oil Corp (MRO.N) and Chevron Corp (CVX.N), the second-largest U.S. oil company.

"People are willing to accept the fact that we may have a very slow, stagnant economy, but the prospect of a sharp downturn seems to be less and less likely, hence the sigh of relief," said Peter Kenny, managing director at Knight Equity Markets in Jersey City, New Jersey.

The Dow Jones industrial average was up 48.20 points, or 0.37 percent, at 13,058.20. The Standard & Poor's 500 Index was up 4.56 points, or 0.32 percent, at 1,413.90. The Nasdaq Composite Index was down 3.72 points, or 0.15 percent, at 2,476.99.

For the week, the Dow gained 1.3 percent, the S&P rose 1.2 percent and the Nasdaq advanced 2.2 percent.

Sun, one of the biggest makers of computers used by businesses, sank 22.6 percent to close at $12.64 after the company late on Thursday blamed the slowing economy for its dismal earnings forecast.

Yahoo Inc's (YHOO.O) shares helped stem the Nasdaq's losses. Shares of the Internet company rose nearly 7 percent to $28.67. The company has intensified talks with Microsoft Corp (MSFT.O) in a last-minute effort to reach a friendly agreement on Microsoft's buyout offer, now worth $42 billion, a source familiar with the matter said. Microsoft slipped 16 cents to $29.24.

The Labor Department said 20,000 jobs were shed last month, marking a fourth straight monthly decline, but the cuts were fewer than the 80,000 which economists surveyed by Reuters had anticipated. The unemployment rate fell to 5.0 percent from 5.1 percent.

Oil shares were higher after U.S. crude futures rose $3.80 to settle at $116.32 a barrel.

Marathon shares rose 6 percent to $50.80 and Chevron rose 38 cents to $95.32. A big gainer in the oil patch was offshore driller Transocean Inc (RIG.N), which rose 4.2 percent to $151.92.

(Editing by Kenneth Barry)