Wall Street advanced for a third day on Friday as the monthly payrolls data showed the U.S. economy may be in better shape than investors had thought and helped whet some investor appetite for risk.

The S&P 500 has rebounded strongly from a nearly oversold condition, gaining nearly 5 percent in the last three days, while the bond market has taken some sharp losses from elevated levels. The U.S. dollar fell as investors welcomed the chance to pour some cash into riskier assets.

A better-than-expected August nonfarm payrolls report was the latest data to help lift some of the gloom over Wall Street. But the stock market's gains were checked after another report from the Institute for Supply Management showed that growth in the U.S. services sector slowed to its slowest pace since the start of the year.

The timing of the economic data rather than its substance made all the difference on Friday in terms of the positive reception from investors, according to Alan Lancz, president of Alan B. Lancz & Associates, an investment advisory firm in Toledo, Ohio. Other than that, he said the jobs report was nothing earth shattering.

If these numbers would have been last week, I don't think it would have had a positive influence, Lancz said. It's one step forward phase, after going backward.

The Dow Jones industrial average <.DJI> gained 70.92 points, or 0.69 percent, to 10,391.02. The Standard & Poor's 500 Index <.SPX> rose 8.89 points, or 0.82 percent, to 1,098.99. The Nasdaq Composite Index <.IXIC> climbed 20.17 points, or 0.92 percent, to 2,220.18.

U.S. employment fell for a third straight month in August, the Labor Department said on Friday. But the loss of 54,000 nonfarm jobs was far less than the 100,000 expected by economists polled by Reuters, and private hiring surprised on the upside.

However that was tempered by the ISM non-manufacturing report that showed the vast U.S. services sector grew in August at its slowest pace since January.

Stocks and other riskier assets have sold off sharply over the summer months. The S&P 500 Index is down about 10 percent from a yearly high in April.

This week's move has helped the S&P 500 work off some of its nearly oversold condition as its relative strength index, or RSI, moves into neutral territory around the 56.5 mark.

RSI compares recent gains and losses and helps determine if a security or an index is under- or overvalued.

There was some support on the corporate front. Take-Two Interactive Inc jumped 9.4 percent to $9.68 a day after the video game maker's quarterly profit smashed Wall Street's expectations of a loss, and it raised its forecast.

However, Campbell Soup Co shed 3.5 percent to $36 after posting lower-than-expected quarterly sales and forecasting growth below its long-term target as it grapples with a weak economy.

Celldex Therapeutics Inc sank 23 percent to $3.68 after Pfizer Inc

ended a co-development deal on Celldex's lead product, a cancer vaccine.

In contrast, shares of Dow component Pfizer gained 0.2 perent to $16.43.

(Reporting by Edward Krudy; Additonal reporting by Rodrigo Campos; Editing by Jan Paschal)

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