The S&P 500 and Nasdaq fell on Friday as traders pocketed gains after encouraging U.S. economic data and on bets Europe will shore up its banking system.

Caution before a weekend meeting to discuss how to strengthen shaky European banks and fight financial market contagion, as well as concern about a hard landing by China's economy triggered selling after the benchmark S&P 500 rose as much as 9 percent from a weekly low hit on Tuesday.

There's more of a fear to be long after a move like the one that we've had than anything else, said Angel Mata, managing director of listed equity trading at Stifel Nicolaus Capital Markets in Baltimore. People have been programed to see the market trading in a range, and it is now hitting the upper band.

The Nasdaq Composite was weighed down by a 26 percent decline in shares of Clearwire and a drop of more than 30 percent by Illumina Inc .

The Dow Jones industrial average <.DJI> was up 26.07 points, or 0.23 percent, at 11,149.40. The S&P 500 <.SPX> was down 4.08 points, or 0.35 percent, at 1,160.89. The Nasdaq Composite <.IXIC> was down 24.03 points, or 0.96 percent, at 2,482.79.

From a technical perspective, the S&P 500 was in a downtrend. The index has been trapped in a range in the past few months, deteriorating into lower lows. The index's wide range is about 1,100 to 1,250.

Analysts see the next important resistance level for the benchmark near 1,180, the 50-day moving average. S&P futures found resistance at their 50-day MA soon after the Labor Department's payrolls report on Friday morning, which showed a larger-than-expected gain in September jobs.

Bank shares were among the big decliners on Friday. Shares of Morgan Stanley , which have been hurt recently by fears of its exposure to European banks, fell 4.5 percent to $14.50 after rising more than 21 percent in the three previous days.

Investors will stay focused on Europe. Optimism the euro zone was doing more to resolve its sovereign debt crisis helped drive a rally in the S&P 500 over the last three sessions.

But Germany and France were split before a crucial summit talks on Sunday about ways to strengthen European banks and fight financial market contagion to prepare for a possible Greek default, diplomats said Friday.

Nonfarm payrolls increased much more than analysts expected in September and revisions to July and August data showed 99,000 more jobs than initially reported.

While the unemployment rate held steady at 9.1 percent, the government report corroborated other economic data that have helped ease fears the U.S. economy was heading into another recession.

(Reporting by Rodrigo Campos; Editing by Kenneth Barry)