Investors think the U.S. economy is at a perfect temperature for stocks: not too hot, not too cold.
The latest evidence came Friday in a jobs report that showed a pickup in hiring last month that could mean more people with paychecks, more spending and higher corporate profits. But the report also showed that wages were stagnant, which cheered investors worried anything pushing up inflation that could prompt the Federal Reserve to raise interest rates soon and kill the rally.
All major stock indexes rose sharply. The Dow Jones industrial average closed 208 points higher. The rally started from the open and swept up nearly every kind of stock, small and large, and in almost every industry. All 10 sectors in the Standard & Poor's 500 index rose.
"The solid payroll report is great for economic growth and stock prices," said Anastasia Amoroso, global market strategist at J.P. Morgan Funds.
The good news pushed up the value of the dollar against other major currencies to the highest level in more than four years. U.S. bonds and gold fell as investors fled traditional "safe haven" assets.
U.S. employers added 248,000 jobs in September, beating market expectations of a 215,000, the Labor Department reported. The hiring helped drive down the unemployment rate to 5.9 percent, the lowest since July 2008. Hiring in July and August was also stronger than initially estimated.
Still, average hourly wages fell a penny last month, the Labor Department reported. Wages are now up just 2 percent in the past year.
"Wage inflation essentially came in zero, and that tells you that the Fed won't be in any rush to raise interest rates," said James Abate, managing director of Centre Asset Management.
The Dow rose 208.64, or 1.2 percent, ending at 17,009.69. It was the third 200-point move in a little over a week as markets turn more volatile.
The S&P 500 index climbed 21.73 points, or 1.1 percent, to close at 1,967.90. The Nasdaq composite rose 45.43 points, or 1 percent, finishing at 4,447.62.
Earlier in the week, investors were rattled by a sharp drop in small-company stocks, pro-democracy protests in Hong Kong and falling oil prices that hurt energy companies, which are big components in stock indexes.
Even with the gains on Friday, all three indexes ended more than a half-percent lower for the week, adding to last week's losses.
Many economists predict the Fed will wait until mid-2015 to start raising rates, then proceed slowly with further hikes. The central bank's low-rate polices have helped keep borrowing rates low for consumers and businesses.
The good news in the U.S. contrasts with troubling signs in other countries. The Chinese economy is slowing, and the 18-country eurozone is teetering on another recession. On Thursday, the European Central Bank disappointed investors by not announcing details of more stimulus measures. All major European indexes ended the week sharply lower.
The prospect of a two-speed global economy drove up the value of the U.S. dollar on Friday. The U.S. Dollar Index, which measures the dollar against six other major currencies, surged 1.3 percent. The euro fell 1.2 percent to $1.2515, while the dollar gained 1.2 percent to 109.76 yen.
Investors will get a better sense of how much the improving economy is helping corporate profits next week when aluminum maker Alcoa (AA) kicks off the unofficial start to corporate earnings season. Financial analysts expect earnings per share for the S&P 500 to rise 6.8 percent from a year earlier, then surge 12 percent the next quarter and for all of 2015, according to S&P Capital IQ, a research firm.
The S&P 500 seems reasonably valued, if you believe the earnings forecasts. The index is trading at 15.6 times its expected earnings per share over the next 12 months, according to S&P Capital IQ. That's slightly cheaper than the long-term average.
In stocks making big moves:
- Shares of Mylan (MYL) jumped 8 percent after the generic-drug maker raised its outlook for the third quarter and year. The stock rose $3.73 to $50.23.
- Diamond Offshore Drilling (DO) lost 5 percent, the most in the S&P 500, as the slumping price of oil this week pushed down several oilfield service companies. Diamond Offshore fell $1.83 to $33.00.
- Salix Pharmaceuticals (SLXP) rose 1.2 percent. The company gained on news it is scrapping its merger with the subsidiary of an Italian drugmaker after the U.S. created new limits on the tax benefits of incorporating overseas. The stock rose $1.78 to $152.87.
Benchmark U.S. crude fell $1.27 to close at $89.74 a barrel on the New York Mercantile Exchange, its lowest level since April of 2013. Brent crude, a benchmark for international oils used by many U.S. refineries, fell $1.11 to close at $92.31 on the ICE Futures exchange in London.
In other energy futures trading on the NYMEX, wholesale gasoline fell 3 cents to close at $2.379 a gallon, heating oil fell 2.2 cents to close at $2.616 a gallon and natural gas rose 10.7 cents to close at $4.039 per 1,000 cubic feet.
Gold fell $22.20, or 1.8 percent, to $1,192.90 an ounce. Silver fell 22 cents to $16.83 an ounce and copper was flat at $3 a pound.
The yield on the 10-year Treasury note rose to 2.44 percent from 2.43 percent on Thursday.