By Noel Randewich and Amruta Khandekar

(Reuters) - U.S. stocks closed higher on FridayA, with the S&P 500 and Nasdaq notching their highest closing levels since early 2022 after a robust U.S. jobs report fueled investor optimism about a soft landing for the economy.

Investors pared bets that the Federal Reserve will cut interest rates in March after a Labor Department report showed nonfarm payrolls increased by 199,000 jobs in November, compared with an estimated increase of 180,000.

The unemployment rate slipped to 3.7%, while average earnings edged up to 0.4% on a monthly basis, compared with forecasts of 0.3% growth.

Interest rate futures show traders widely expect the Federal Reserve to hold interest rates steady at its meeting next week, according to the CME FedWatch tool. However, futures prices now imply traders mostly expect the Fed to start cutting rates in May, two months later than the March meeting many investors had been betting on in recent days.

"The drop in the unemployment rate in particular will assuage any concerns of a recession, and with payrolls and earnings both rising, it keeps the ‘soft landing’ narrative very much in the ascendancy," said Stuart Cole, head macro economist at Equiti Capital in London.

    "The report will likely see some of those forecasting an early Fed cut next year re-evaluating their positions," Cole said.

The S&P 500 climbed 0.41% to end the session at 4,604.37 points.

The Nasdaq gained 0.45% to 14,403.97 points, while Dow Jones Industrial Average rose 0.36% to 36,247.87 points.

The S&P 500's close was its highest since March 2022, while the Nasdaq's close was it highest since April 2022.

For the week, the S&P 500 rose 0.21%, the sixth time in a row it has logged a weekly gain, its longest streak since November 2019.

The Dow edged up 0.01% for the week, also its sixth straight weekly gain, its longest run of positive weeks since February 2019.

The Nasdaq gained 0.69% for the week.

The S&P 500 remains down 4% from its record high close in late 2021 with the Nasdaq still down 10% from its record high then.

Chipmaker Nvidia (NASDAQ:NVDA) and Facebook-owner Meta Platforms (NASDAQ:META) each gained nearly 2% in Friday's session.

Shares of Google-parent Alphabet (NASDAQ:GOOGL) dipped 1.4%, giving up gains after an AI-led rally in the previous session.

Other data showed U.S. consumer sentiment perked up much more than expected in December, snapping four straight months of declines.

Robust quarterly reports and optimism that the Fed has finished raising rates have fueled steady gains in the U.S. stock market since late October.

Honeywell (NASDAQ:HON) dipped 1.6% after the industrial firm said it would buy air conditioner maker Carrier Global (NYSE:CARR)'s security business for $4.95 billion. Carrier's shares rose almost 4%.

Paramount Global soared 12% after reports of takeover interest in the media company. Peer Warner Bros Discovery (NASDAQ:WBD) jumped 6.6%.

DocuSign (NASDAQ:DOCU) rallied 4.8% after the e-signature product provider raised its annual forecast for revenue.

Advancing issues outnumbered falling ones within the S&P 500 by a 1.5-to-one ratio.

The S&P 500 posted 33 new highs and no new lows; the Nasdaq recorded 104 new highs and 90 new lows.

Volume on U.S. exchanges was 11.0 billion shares traded, in line with the previous 20 sessions.