Stocks were little changed on Friday as investors treaded lightly after a mixed U.S. employment report that fell short of increased expectations of recovery in the labor market.

The U.S. economy created 103,000 jobs in December, the Labor Department said, below the forecast of 175,000. But October and November were revised upward, and December's unemployment rate fell to 9.4 percent, the lowest since May 2009.

It's probably not as good a number as the bulls wanted to see, but by no means is it a bad number, said Stephen Massocca, managing director at Wedbush Morgan in San Francisco.

He said the market's recent upward trend should continue.

People will continue to look at the economy as something that is improving and that will continue to add buoyancy to equity valuations, Massocca said.

The Labor Department revisions showed 70,000 more jobs added than previously reported in October and November.

Oil-related shares led gains, with the S&P energy sector <.GSPE> up 0.5 percent as crude oil rose 0.8 percent to $89.07 per barrel.

For the jobs report, economists had revised their expectations for non-farm payrolls higher after Wednesday's surprisingly strong ADP private-sector employment figures, which were triple forecasts.

If we hadn't had that ADP number, this would have been seen more positively, said Massocca.

The Dow Jones industrial average <.DJI> dropped 4.24 points, or 0.04 percent, to 11,693.07. The Standard & Poor's 500 Index <.SPX> slipped 1.19 points, or 0.09 percent, to 1,272.66. The Nasdaq Composite Index <.IXIC> was off 2.25 points, or 0.08 percent, to 2,707.64.

The S&P 500 has posted gains for the day on each of the last four monthly payrolls reports, according to a data analysis by New York-based Instinet. Only one of the four gains was more than 1 percent, while the other three were less than 0.65 percent.

In energy, Goldman Sachs upgraded Baker Hughes Inc and Diamond Offshore Drilling Inc , lifting the PHLX Oil Service sector <.OSX> 1.5 percent.

Baker Hughes shares jumped 4.3 percent to $57.19 and Diamond Offshore gained 4.1 percent to $70.04.

On Capitol Hill, Federal Reserve Chairman Ben Bernanke sounded cautiously more upbeat than he had in recent public remarks, citing improvements in consumer spending and a drop in claims for jobless benefits as hopeful signs for the recovery.

(Reporting by Chuck Mikolajczak; Editing by Kenneth Barry)