The Dow cut early gains on Friday, pressured by strength in the U.S. dollar, while declines in shares of large cap technology companies dragged the Nasdaq into the red.

The markets initially opened higher as data showing stronger-than-expected retail sales in November raised hopes of a solid recovery.

Sales last month posted their biggest advance since August, while a separate report showed that consumer sentiment had improved in early December. The data assuaged investor concerns about consumer spending, which makes up about two-thirds of the economy.

The S&P Retail index <.RLX> rose 1 percent, while the S&P Consumer Discretionary sector <.GSPD> was the top percentage gainer among S&P sectors.

When you get a sharp rise in consumer spending, especially when everyone is expecting the consumer to be unwilling to spend, that suggests that the thesis that the economy will remain weak needs to be revised, said Charles Lieberman, chief investment officer at Advisors Capital Management in Paramus, New Jersey.

The Dow Jones industrial average <.DJI> added 20.93 points, or 0.20 percent, to 10,426.76. The Standard & Poor's 500 Index <.SPX> edged up 0.11 point, or 0.01 percent, at 1,102.46. The Nasdaq Composite Index <.IXIC> slipped 8.45 points, or 0.39 percent, to 2,182.41.

The S&P Retail index <.RLX> rose 1 percent, while the S&P Consumer Discretionary sector <.GSPD> was the top percentage gainer among S&P sectors.

The positive data also lifted the U.S. dollar, which rose 0.7 percent against a basket of currencies and caused a headwind for stocks. Stocks and the greenback have had an inverse relationship as investors shift between safe-haven and riskier assets.

United Technologies Corp rose 1.9 percent to $69.21 and was the top lift on the Dow a day after it said it expects profits to rise about 10 percent in 2010 on cost cuts.

Mining stocks also advanced after JPMorgan lifted its price target on five companies in the sector, including Alcoa Inc and Freeport McMoRan .

Alcoa shares surged 7.3 percent and were the top percentage gainer among Dow components.

On the Nasdaq, Apple Inc fell 0.6 percent to $195.32 after the tech bellwether said it had filed a countersuit against Nokia Corp , claiming the cell phone maker was infringing upon Apple patents.

National Semiconductor fell 4 percent to $14.57 after reporting results late on Thursday that prompted concerns about the company's ability to regain market share.

In other data released on Friday, U.S. import prices rose 1.7 percent in November, more than expected, while business inventories were unexpectedly up in October.

(Editing by Kenneth Barry)

Retail sales S&P New Jersey