* Payrolls rise much less than expected * S&P 500 faces strong resistance after two-day rally * Dow off 0.2 pct, S&P down 0.2 pct, Nasdaq up 0.1 pct (Updates to midday, changes byline)
By Chuck Mikolajcza
NEW YORK, Dec 3 (Reuters) - U.S. stocks edged mostly lower on Friday as Wall Street shook off an unexpectedly weak payrolls report, while investors were reassured by the broader economic picture and the likelihood the Federal Reserve would stay the course on its stimulus plan.
U.S. employment barely moved higher in November and the jobless rate unexpectedly jumped to a seven-month high of 9.8 percent, the Labor Department said.
But recent data, including retail sales and other labor reports, have raised optimism the recovery remains on track after hitting a soft patch in the summer.
"Every other economic data point has been constructive," said Phil Orlando, chief equity market strategist at Federated Investors in New York.
"The market is reading through the weak jobs report to Washington and they are drawing two conclusions -- the Fed is not going to be able to abandon quantitative easing in the face of this weak jobs number, and if Congress thought they could begin to raise taxes at this point in the fragility of the economic cycle, they are sadly mistaken."
The lack of investor alarm over the jobs report was reflected in the CBOE Volatility Index or Vix <.VIX>, also known as Wall Street's "fear gauge," which shed 6.1 percent to 18.20.
A separate report on Friday showed the U.S. services sector grew for an 11th straight month in November, according to the Institute for Supply Management, but the government said new U.S. factory orders dropped in October.
The Dow Jones industrial average dropped 21.83 points, or 0.19 percent, to 11,340.58. The Standard & Poor's 500 Index dropped 2.37 points, or 0.19 percent, to 1,219.16. But the Nasdaq Composite Index gained 2.57 points, or 0.10 percent, to 2,581.92.
The S&P 500 faced strong technical resistance at about 1,228, near a recent high of more than two years and also the 61.8 percent Fibonacci retracement of the index's slide from October 2007 to March 2009, a key technical indicator.
Support for the benchmark kicks in at 1,200, which was recently a stubborn resistance point, and near 1,195, its 14-day moving average.
Also helping to curb stocks' decline was the euro's gain
on Friday of more than 1 percent against the U.S. dollar to
$1.3386
The weaker dollar helped boost commodity-related stocks. The S&P materials index gained 0.3 percent, led by a 3.3 percent gain in Newmont Mining Corp to $62.37.
In company news, U.S.-based mining group Walter Energy Inc agreed to buy Canada's Western Coal Corp for about $3.25 billion to create the world's leading metallurgical coal producer. Walter added 1.2 percent to $106.88. (Reporting by Chuck Mikolajczak; Editing by Jan Paschal)