Stocks were slightly lower on Friday as investors were pulled in a tug-of-war between strong domestic data and continued concerns about Europe's debt crisis.

The U.S. economy added 200,000 jobs in December, topping forecasts, and the jobless rate fell to 8.5 percent, a near three-year low. The data followed strong employment reports on Thursday, and recent bullish readings on housing and manufacturing.

Signals of stronger U.S. growth have helped to lift equities, with major indexes gaining more than 1 percent this week. At the same time, volatility has increased as the emphasis went back and forth between the U.S. economy and fears that Europe's economic troubles would spill over to the global economy.

The data has been very good and should have implications for the sustainability of consumer spending and strength in manufacturing, but the lack of commitment we're seeing shows how there are still concerns about Europe, said David Joy, chief market strategist at Ameriprise Financial in Boston.

Fitch cut Hungary's credit rating to junk in the latest reminder of contagion tied to the region's debt crisis.

The euro, which has been closely correlated with global equities, fell near a fresh 16-month low against the dollar.

Stability there is starting to fray a bit, markets seem to be on shaky ground, and that's holding us back, added Joy, who helps oversee $571 billion in assets.

The Dow Jones industrial average <.DJI> was down 38.15 points, or 0.31 percent, at 12,377.55. The Standard & Poor's 500 Index <.SPX> slipped 2.01 points, or 0.16 percent, at 1,279.05. The Nasdaq Composite Index <.IXIC> was up 5.49 points, or 0.21 percent, at 2,675.35.

For the week, the Dow is up 1.3 percent, the S&P is up 1.7 percent, and the Nasdaq is up 2.7 percent. Most of the gains came from cyclical sectors tied to growth, including financials and energy.

Those were among the weakest on Friday, with the S&P financial sector <.GSPF> off 0.6 percent and the S&P energy index <.GSPE> off 0.5 percent.

Goldman Sachs Group Inc fell 1.1 percent to $93.53 after JPMorgan cut its stock target and Bernstein forecast a challenging year for the investment banking giant.

The Nasdaq was helped by strength in large-cap Internet stocks. Netflix Inc gained 8.5 percent to $86.02, while Inc added 3.3 percent to $183.42.

Alcoa Inc fell 2.1 percent at $9.16 after the largest U.S. aluminum producer said it will cut global smelting capacity amid a steep drop in metal prices.

Sprint Nextel Corp rose 0.9 percent to $2.26 a day after its chief executive said the mobile service provider had iPhone sales in the fourth quarter.

The number of advancing and declining stocks was about equal on both the New York Stock Exchange and the Nasdaq.

(Reporting By Ryan Vlastelica; editing by Jeffrey Benkoe)