The market moved higher and never looked back as a better-than-expected employment report calmed investors' fears that a double dip recession remains a threat.
"The situation overall, while not terrific, is better than some had feared," said Brian Bush, director of equity research at Stephens Inc.
The stock rebound came after a report on the nation's unemployment showed unexpected improvement, and Intel predicted third-quarter chip sales would fall less than analysts had anticipated.
Easing fears of a dip back into recession, the unemployment rate in the United States fell to a five-month low in August as companies added jobs for a fourth straight month.
The jobless rate dropped to 5.7 percent last month, down from July's 5.9 percent and the lowest since March, the Labor Department reported Friday. Economists had expected the rate to remain unchanged or edge up slightly.
"This is not a jobless recovery anymore," said Sung Won Sohn, Wells Fargo's chief economist. "The doom and gloom on Wall Street has been exaggerated."
Companies added 39,000 new jobs last month, a weak showing that was in line with what analysts expected. It was the fourth consecutive gain in payrolls, including a revised 67,000 jobs created in July. But analysts weren't exuberant. The economy must generate 125,000 new jobs per month to keep the unemployment rate stable.
Meanwhile, with the good news, the broader market also moved higher. The Nasdaq composite index rose 48.38 points, or 3.9 percent, to 1,299.38. The Standard & Poor's 500 index gained 17.41 points, or 2 percent, to 896.56.
Stock prices rallied during the first three weeks of August, but have largely fallen back since then.
With consumer confidence still fragile and businesses cautious about capital spending, analysts said the market remains susceptible to further declines. It will take a string of positive news, they said, for stock prices to move steadily higher.
For the time being, "it's going to be a very bumpy ride," said Brian Bruce, director of global investments at PanAgora Asset Management.
Low interest rates have helped sustain the housing and automobile markets, but retailers and airlines continue to suffer. With so much conflicting data, Bruce said investors are likely to take their cues on any given day from the latest economic indicator or headline-grabbing news.
Shares of Intel were up $1.27, or 8.4 percent, to $16.38 after the chip maker lowered its third-quarter sales estimates late Thursday, but not by as much as Wall Street had feared. Shares of Advanced Micro Devices, a rival, rose 24 cents to $8.23.
Vivendi Universal got a boost after the Wall Street Journal, citing unnamed sources, reported that the company was in talks to sell its publishing unit for between $3 billion and $5 billion. Vivendi shares were up $1.67, or 14.7 percent, to $13.03.
However, R.J. Reynolds Tobacco fell sharply after the company lowered its earnings forecast for the third quarter. Shares of R.J. Reynolds declined $4.50, or 7.9 percent, to $52.80.
Advancing issues outnumbered decliners by about 7 to 3 on the New York Stock Exchange. Volume came to 903.03 million shares, down from 1.03 billion traded at the same point Thursday.
The Russell 2000 index, the barometer of smaller company stocks, gained 10.32 points, or 2.7 percent, to 391.38.