* U.S. economy adds 148,000 jobs in Dec vs est. 190,000
* Average hourly earnings rise 0.3 pct, in line with estimates
* Energy stocks fall after oil prices retreat
* Indexes up: Dow 0.34 pct, S&P 0.32 pct, Nasdaq 0.59 pct
(Updates to early afternoon)
By Sruthi Shankar
Jan 5 (Reuters) - Wall Street's main indexes extended their new year rally on Friday after weak December U.S. jobs data raised expectations that the Federal Reserve would stick to its policy of gradual interest rate hikes in 2018.
U.S. stocks kicked off 2018 on a strong note, carrying momentum from last year driven by a series of strong economic reports from across the globe.
The S&P 500 and the Nasdaq were on track for their biggest percentage gains in more than a year on Friday, and the Dow in about a month.
U.S. job growth slowed more than expected in December amid a decline in retail employment, but a pick-up in monthly wage gains pointed to labor market strength. Nonfarm payrolls increased by 148,000 jobs last month, the Labor Department said. Economists polled by Reuters had expected a rise of 190,000.
Average hourly earnings rose 0.3 percent in December, lifting the annual increase in wages to 2.5 percent from 2.4 percent in November.
"The market is shrugging it off because it's not weak enough to detract the Fed from raising rates further. The modest rise in average hourly wage number should give the Fed some breathing room," said Bryce Doty, senior portfolio manager, SIT Fixed Income Advisors LLC, Minneapolis.
Traders of U.S. short-term interest-rate futures continued to bet the Fed would raise interest rates just two times this year, heavily pricing in a March rate hike. At 12:39 p.m. ET (1739 GMT), the Dow Jones Industrial Average was up 84.64 points, or 0.34 percent, at 25,159.77 and the S&P 500 was up 8.69 points, or 0.32 percent, at 2,732.68. The Nasdaq Composite was up 41.59 points, or 0.59 percent, at 7,119.51.
"It's going to take more than employment number that is to the weaker side (to bring the market lower)," said Mark Heppenstall, chief investment officer at Penn Mutual Asset Management in Horsham, Pennsylvania.
Technology index's 0.77 percent gain led the advancers among the 11 major S&P sectors.
A more than 1 percent rise in Microsoft , Apple and Google-parent Alphabet boosted the index.
Energy index declined 0.56 percent as oil prices pulled away from their 2015 highs on soaring U.S. production. Francesca's Holdings tanked 20 percent after the women's apparel and accessories maker said it expected up to 17 percent decline in current-quarter same-store sales. Advancing issues outnumbered decliners on the NYSE by 1,435 to 1,377. On the Nasdaq, 1,497 issues rose and 1,380 fell.
(Reporting by Sruthi Shankar in Bengaluru; Editing by Sriraj Kalluvila)
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