NEW YORK An improved employment picture in the U.S., along with promises of more easy money from central banks abroad, sent investors into a buying mood Friday, as stocks on Wall Street finished the week with strong gains.
The government said employers added 195,000 jobs in June. Economists had predicted a gain of 165,000. The unemployment rate remained at 7.6 percent. The report also said that the economy had added 70,000 more jobs in April and May than previously thought -- 50,000 in April and 20,000 in May.
The Dow Jones industrial average was up 147 points to 15,135, or nearly 1 percent at the close of trading Friday. The Standard & Poor's 500 rose 16 points, more than 1 percent, to 1,631. The Nasdaq climbed 35 points, also more than 1 percent, to 3,479.
That's despite jobs numbers that weren't considered by many economists to be all that great.
"If you dig deep into the numbers it's not a gangbusters in terms of employment," said Jordan Waxman, managing director and partner at HighTower, a wealth management firm in New York. "The work week isn't really getting longer, firms are being very selective about hiring, but they are on the mend."
Stocks initially rose, then gave back nearly all their gains, and then climbed again as investors seemed to be trying to make sense of the government's monthly jobs report. Overnight, stock futures had surged on news that European and British central banks would continue to keep low interest rates in place. That creates more demand for U.S. equities as international institutions look for safe places to park the new cash.
The unemployment rate remained at 7.6 percent, as discouraged workers who had left the job search resumed their search for work. More than half the job additions came from hotels, restaurants, entertainment and retail, typically lower paying positions.
As investors bought stocks, they sold bonds: The yield on the 10-year Treasury note jumped to 2.72 percent from 2.56 percent, which meant that the government has to pay more to persuade investors to buy bonds. That was likely the product of two catalysts: investors are feeling confident about putting money into stocks, but they also may be guessing that the Federal Reserve will soon stop buying bonds as a means to prop up the economy.
The interest rate rise left homebuilders particularly hard hit; many of their stocks fell more than 2 percent on the news.
While Friday's jobs report reinforced the idea that the Fed could soon pull back on its economic stimulus measures, analysts and investors remain divided on the subject, which has overshadowed all other considerations when trying to gauge where the market might go.
"We now place a 40% probability on the Fed tapering later this year (previously 35%), and 60% probability on the Fed waiting until early-2104 (previously 65%)," said Paul Edelstein, an economist at analytical firm IHS. "Those that favor tapering sooner rather than later can point to the payroll growth numbers as evidence that the labor market has shifted into a higher gear this year and on a sustained basis. Yet those that favor waiting will look at the unemployment rate as evidence that the labor market is just keeping up with the labor force. Stronger payroll growth must translate into declining unemployment over the next couple of months."
The price of oil was up, nearing $102 a barrel in electronic trading on the New York Mercantile Exchange. That could signal that investors are optimistic about manufacturing and the broader economy -- or it could mean they're unnerved by political unrest in Egypt. On Wednesday, the military ousted Egyptian President Mohammed Morsi.
There were also reminders around the world that the economy is far from healed. Germany reported that orders for its industrial goods fell.
On Thursday, when the U.S. markets were closed for the Fourth of July holiday, the International Monetary Fund pressed Italy to do more about "unacceptably high" unemployment. In Portugal, politicians haggled over government spending cuts in a dispute that threatened to pitch the bailed-out country into turmoil and reignited concerns over Europe's debt crisis.
Gold fell sharply, nearly 3 percent. The yellow metal seems to have ceased being been seen as a safe-haven investment, while at the same time it has lost its attraction as a hedge against inflation, since inflation appears to be nowhere in sight.