Investors largely looked past a report that the U.S. unemployment rate in March - its highest level since 1983. Friday's modest gains continue a four-week surge that has seen stocks advance 20 percent.
The Labor Department's report wasn't as bad as the worst expectations in the market. The numbers were still grim but didn't derail an emerging sense of optimism over the past four months that the economy may be beginning to right itself.
According to preliminary calculations, the Dow gained 39.51, or 0.50 percent, to close at 8,017.59. The Standard & Poor's 500 index added 8.12, or 0.97 percent, to 842.50 and the Nasdaq rose 19.24, or 1.2 percent, to 1,621.87, helped by a surge in shares of BlackBerry maker Research in Motion Ltd., which turned in better-than-expected profits.
The Dow for most of Thursday, but slipped below by the end of the day. Friday was the complete opposite, as the index showed modest losses until its late push.
Tom Phillips, president of TS Phillips Investments in Oklahoma City, said the improved tone in the market since March is helping traders show more moderate reactions to bad news than they might have a month ago.
"If the expectation was for truly horrendous numbers and they're only ugly that's a good thing," he said.
Employers slashed a net total of 663,000 jobs last month, only slightly worse than the 654,000 economists expected. The employment rate jumped to its highest level since late 1983, when the economy was starting to emerge from a deep recession.
The economy has shed a net total of 5.1 million jobs since the recession began in December 2007. Nearly two-thirds of the losses have come in the last five months.
Meanwhile, protesters asking the government to "bail out the people" are holding a rally on Wall Street. They say they should get some of the billions of dollars being spent to save big business.
The rally is starting in downtown Manhattan with a march down Broadway and ends at the iconic statue of a bull on Wall Street.
The men, women and children are protesting near the offices of financial giants like Fidelity, American Express, the Federal Reserve and the New York Stock Exchange.
They plan to repeat the protest Saturday, with chanting and drumming.
The monthly employment report is often regarded as the most important piece of economic news affecting the market. There is even greater focus on jobs data now that the U.S. recession has stretched into the longest downturn since World War II.
"There are some green shoots in the economy," Mark Zandi, chief economist for Moody's Economy told CBS News, "but if we continue to lose 700,000 jobs per month, these green shoots are just going to burn out."
Zandi said he expects the unemployment rate to peak at around 10 percent sometime in the spring or early summer.
Even as the numbers weren't as bad as some analysts had feared investors will need to see further signs that the recession isn't getting worse to keep the rally going. Analysts said the labor market is unlikely to provide much encouragement anytime soon.
"I would say that there is no sign of a bottom in these numbers," said Charles K. Ortel, managing director of Newport Value Partners L.L.C., a New York investment research firm.
Technology stocks found support after Research in Motion posted a 26 percent increase in its fourth-quarter earnings. The stock jumped $10.20, or 20.78 percent, to $59.29.
Traders have been emboldened in recent weeks by better-than-expected readings on key economic factors like housing, banking and manufacturing. The Dow ended Thursday up 20.4 percent since March 9 - its best four-week run since 1933.
The market could still recover even if unemployment remains high. Wall Street will just want signs that prospects for the labor market aren't getting far worse. In downturns during the past 60 years, the S&P 500 index has hit bottom an average of four months before a recession ended and about nine months before unemployment hit its peak.
Stocks found no help Friday from a report showing that the services sector of the economy shrank for the sixth consecutive month in March and at a faster pace than expected.
The Institute for Supply Management's index fell to 40.8 last month from 41.6 in February. Any number below 50 indicates contraction in the services industry.
Bond prices fell, pushing the yield on the benchmark 10-year Treasury note up to 2.89 percent from 2.76 percent late Thursday. The yield on the three-month T-bill rose to 0.21 percent from 0.20 percent.
European and Asian markets were mixed following a powerful global stock rally the day before after world leaders pledged $1 trillion for financial rescue measures and promised stronger regulation of financial institutions.
Japan's Nikkei stock average closed 0.3 percent higher, while Britain's FTSE 100 fell 2.3 percent in afternoon trading. Germany's DAX rose 0.1 percent and France's CAC-40 fell 1.1 percent.