The major averages closed mixed but cut losses in afternoon trading after dropping on the back of labor data as investors looked to the upcoming Federal Reserve meeting. The Dow Jones Industrial Average closed up 34 points, or 0.1%, after dropping more than 350 points this morning. The S&P 500 fell 4 points while the Nasdaq Composite dropped 20 points, mitigating earlier losses of 1.6%.

All three indexes set weekly gains, with the Nasdaq posting the largest increase at 2.1%. Friday's close marked the first streak in weekly gains for the three major indexes since October.

Stocks dipped after labor data released Friday morning showed payrolls increased 263,000 in November, a bigger gain than the 200,000 increase expected by economists polled by Dow Jones. The unemployment rate held steady at 3.7%. Average hourly earnings also came in above expectations, jumping 0.6% compared with the prior month and 5.1% against the same month a year ago.

But the market quelled some of those losses in the subsequent hours. Market observers attributed the move to investors being increasingly able to shake off concerning individual economic indicators following remarks on Wednesday from Fed Chair Jerome Powell that appeared to confirm slowing rate hikes starting as early as December.

"Just one strong labor data point is not going to be enough after Powell's speech," said Anna Han, vice president at Wells Fargo Securities. "He's confirming that we are seeing the trend that we are having an impact on inflation, so I think that sort of soothes the market and takes pressure off."

It was the final monthly employment report before the Fed's two-day meeting Dec. 13-14, in which the central bank is expected to slow to a 50 basis point interest rate hike from the 75 basis point hikes seen in recent months.