(Reuters) -- Stocks were on track to post gains for the first week of 2012 on Friday as signs of a sustainable economic recovery overshadowed lingering concerns about the euro zone's debt crisis.

The government's report on non-farm payroll jobs for December was the latest in a list of economic numbers that were stronger than anticipated. Data this week painted a rosier picture on the labor, housing and retail markets, auguring a recovery in growth in 2012.

The employment statistics were unapologetically robust today and that is exactly what the market is looking for: signs of domestic growth, said Jim Russell, regional investment manager for U.S. Bank Wealth Management in Cincinnati.

The Dow and S&P were on track to rise more than 1 percent this week and the Nasdaq added nearly 3 percent, with most gains coming from cyclical sectors tied to growth, including financials and energy. At the same time, volatility receded and the CBOE volatility index <.VIX> fell about 12 percent this week.

On Friday, the S&P hovered near break-even for most of the session, though it was mostly in negative territory. Worries about higher bond yields in Italy and Spain, as well as potential oil supply disruptions in the Middle East, were cited as giving investors a pause.

Caution ahead of next week's auctions sent Italian benchmark yields above 7 percent while Spain's 10-year paper yields also edged up to 5.758 percent.

There were a lot of fireworks earlier in the week and perhaps there's a little bit of nervousness going into the weekend with Europe and Iran as concerns, said U.S. Bank's Russell. It feels like a tired market.

The Dow Jones industrial average <.DJI> shed 42.23 points, or 0.34 percent, to 12,373.47. The Standard & Poor's 500 Index <.INX> dipped 1.55 points, or 0.12 percent, to 1,279.51. The Nasdaq Composite <.IXIC> gained 8.75 points, or 0.33 percent, to 2,678.61.

Amazon and Netflix helped boost both the Nasdaq Composite and the discretionaries sector of the S&P 500 <.GSPD>. Netflix gained 9.7 percent to $86.97, up more than 25 percent this week, while Amazon added 3.5 percent to $183.74.

Alcoa Inc fell 1.4 percent to $9.23 after the largest U.S. aluminum producer said it will cut global smelting capacity amid a steep drop in metal prices.

(Reporting by Rodrigo Campos; Editing by Kenneth Barry)

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