The Dow and the S&P 500 pulled back from 15-month highs on Friday after an unexpectedly weak employment report dampened hopes for a rebound in the labor market.

But losses were curbed after shipping company United Parcel Service Inc boosted its fourth-quarter outlook and said it will cut 1,800 management and administrative jobs.

UPS shares were up 4.1 percent to $59.76. Rival FedEx Corp added 0.8 percent to $83.62 and the Dow Jones Transportation average <.DJT> climbed 1.3 percent.

Both UPS and FedEx are economic bellwethers because they reflect trends in business and consumer spending.

Labor Department data showed U.S. employers unexpectedly cut 85,000 jobs in December, confounding economists' forecast that payrolls would be unchanged. However, the department revised November data to show 4,000 jobs were added rather than the initially reported 11,000 jobs lost.

It's clearly not the report that the market was looking for or wanted, said Burt White, managing director and chief investment officer of LPL Financial in Boston.

But it doesn't derail the fact that the employment picture is getting better.

The Dow Jones industrial average <.DJI> dropped 21.16 points, or 0.20 percent, to 10,585.70. The Standard & Poor's 500 Index <.SPX> lost 1.42 points, or 0.12 percent, to 1,140.27. The Nasdaq Composite Index <.IXIC> gained 6.90 points, or 0.30 percent, to 2,306.95.

James Bullard, president of the St. Louis Federal Reserve Bank, said he would like to see more improvement in the U.S. job market before the Fed exits some stimulus programs.

The Nasdaq rebounded on gains in biotechnology companies Teva Pharmaceutical Industries Ltd and Genzyme Corp .

Teva gained 2.2 percent to $58.09 a day after the world's largest generic drugmaker set a revenue target for 2015 of $31 billion, more than double its current annual amount.

Genzyme Corp advanced for a second day after a source said billionaire investor Carl Icahn was considering a proxy battle at the biotech company. [ID:nN07196523] Genzyme was up 4.7 percent to $53.54 after a 4.4 percent advance on Thursday.

(Editing by Kenneth Barry)