* Zynga shares slide after warning, Facebook slips
* Sprint could counterbid on PCS -sources
* Investors eye Q3 earnings next week
* Dow up 0.3 pct, S&P 500 up 0.1 pct, but Nasdaq off 0.1 pct
By Angela Moon
NEW YORK, Oct 5 (Reuters) - The S&P 500 advanced for a fifth
day on Friday after an unexpected drop in the unemployment rate
suggested the U.S. economy is on the right track.
Growth-oriented stocks were the day's top gainers. The S&P
industrial sector index rose 0.6 percent. An S&P
financial sector index added 0.1 percent.
All three major U.S. stock indexes had pulled off session
highs by mid-afternoon, suggesting the market may struggle to
make further progress with third-quarter earnings season
starting next week. The Dow industrials maintained a modest
gain, after touching an intraday peak that was its highest in
almost five years. The Nasdaq was flat, dipping a toe into
The S&P 500 is still up 16.4 percent so far this year. The
benchmark is on track for its best yearly run since 2009 when
stocks rebounded after the financial crisis.
"On the negative side, the speed with which the market will
get overbought on continued strength may pose a problem," said
Ralph Edwards, director of derivatives strategy at ITG in New
"The market never had a truly ugly day since the highs
registered on September 14th."
Much of the market's gains this year have been prompted by
easy monetary policies. The improvement in U.S. hiring last
month is one bright spot as manufacturing around the world has
been showing signs of softness in recent months.
The Dow Jones industrial average gained 38.87 points,
or 0.29 percent, to 13,614.23. But the Standard & Poor's 500
Index rose 2.09 points, or 0.14 percent, to 1,463.49. The
Nasdaq Composite Index dipped 1.99 points, or 0.06
percent, at 3,147.46.
Labor Department data showed the jobless rate dropped by 0.3
percentage point in September to 7.8 percent, its lowest since
January 2009. Investors focused on a survey of households that
pointed to a big surge in hiring.
A separate survey of business establishments showed
employers added 114,000 jobs to their payrolls last month while
data for July and August was revised to show 86,000 more jobs
created than previously reported.
"What this suggests at the end of the day is that demand in
the United States will hold up reasonably well," said Kevin
Caron, market strategist at Stifel, Nicolaus & Co in Florham
Park, New Jersey.
With hiring still well below full recovery levels, the
employment data also leaves the door open to more stimulus from
the Federal Reserve.
"It wasn't so strong that it upset the apple cart for those
that are looking for additional easing by the central banks,"
Zynga shares plunged 16.7 percent to $2.35 after it
slashed its 2012 outlook for a second time, fanning doubts about
the games maker's ability to shore up its dwindling earnings.
Facebook, which derives more than a tenth of its
revenue from fees paid by Zynga, lost 2.5 percent to $21.40.
Investors will turn their attention next week to the start
of the third-quarter earnings season. S&P 500 companies'
earnings are expected to drop more than 2 percent in the
quarter, compared with a year earlier, according to Thomson
Reuters data. The decline would be the first since 2009.
Dow component Alcoa Inc will kick off the earnings
period on Tuesday, when the aluminum company is expected to
report that it broke even, compared with earnings of 15 cents a
share a year ago. Alcoa's stock was unchanged at $9.07 in
mid-afternoon trading on Friday.
Sprint Nextel is considering making a rival bid for
MetroPCS Communications, which agreed on Wednesday to a
merger with Deutsche Telekom's T-Mobile USA,
according to people familiar with the situation.
Sprint Nextel shares rose 2.1 percent to $5.20, while
MetroPCS gained 1.3 percent to $12.85.