Steady growth in hiring last month sent the stock market sharply higher Friday.
The 175,000 jobs added by U.S. employers last month was just what investors wanted. The number suggested that the economy is growing, but not so strongly that the Federal Reserve will pull back from its economic stimulus soon.
"This was, in our view, very much a `Goldilocks' number," said Phil Orlando, chief equity strategist at Federated Investors. "There is zero chance that the Federal Reserve is going to start tapering monetary policy," at its next two-day policy meeting starting June 18
The central bank is buying $85 billion of bonds every month to keep interest rates low and encourage borrowing, spending and investing in riskier assets like stocks.
Stocks rose strongly Friday morning, then eased slightly in the early afternoon. The gains accelerated in the final hour of trading.
The Dow Jones Industrial average had its best day in five months. It rose 207 points, or 1.4 percent, to close at 15,248.12. That gain was surpassed this year only by its 2.4 percent rise Jan. 2.
Boeing led the index higher with a gain of $2.73, or 2.7 percent, to $102.49. Industrial conglomerate 3M gained $2.44, or 2.2 percent, to $111.11. Twenty-six of the 30 stocks in the Dow rose.
The Standard & Poor's 500 index rose 20.82 points, or 1.3 percent, to 1,643.38. The Nasdaq composite rose 45.16 points, or 1.3 percent, to 3,469.22.
Nine of the 10 industry groups in the S&P 500 index rose, led by consumer discretionary stocks, which stand to benefit more than other sectors if the economy picks up. Industrial companies and banks also posted strong gains.
The only S&P 500 industry group that fell was telecommunications, a so-called defensive sector that investors favor when they are seeking safety and high dividends.
Financial markets have turned volatile over the past two weeks as traders parse comments from Fed officials for hints about when the central bank will cut back on its support. When it happens, the wind-down will help nudge interest rates higher.
For investors who expect the Fed to stay the course, "these types of slow economic growth reports speak to that," said Kevin Mahn, chief investment officer at Hennion & Walsh Asset Management. "It keeps interest rates at record lows and it keeps the equity markets humming."
The S&P 500 index is down 1.6 percent since reaching a record high on May 21. The next day, Fed Chairman Ben Bernanke said the Fed could ease up on its economic stimulus program in one of its next few meetings.
In government bond trading, the yield on the 10-year Treasury note rose to 2.18 percent from 2.08 percent late Thursday as investors moved out of safer assets.
The Labor Department's monthly survey of employment is one of the most important gauges of the U.S. economy and receives close scrutiny from investors. It can frequently cause big moves in financial markets, especially if the report shows that employment is stronger or weaker than economists were expecting.
On May 3, the government reported not only a strong pickup in hiring in April but it also revised sharply upward its estimates for job growth in February and March. That sent the Dow Jones industrial average past 15,000 for the first time, while the S&P 500 index broke through 1,600.
In the weeks following that report, bond yields rose from 1.63 percent as high as 2.20 percent May 31. That meant investors thought the economy was strengthening, dampening the appeal of low-risk assets like bonds. It also meant investors believed the Fed would act sooner than previously thought to curtail its bond-buying program.
Investors are still keeping an eye on interest rates because of the impact that they have on the economy. For example, higher borrowing costs will push up mortgage rates and curb demand for housing. The recovery in the housing market has also boosted stock prices this year.
"Interest rates have really gone up in quite dramatically from a month ago," said Paul Hogan, the manager of the FAM Equity-Income Fund. "If they continue to rise, the market will be a little more bit choppy."
The improving economy has also helped support the dollar this year. The U.S. currency rose against the euro and the yen Friday.
The price of gold fell $32.80, or 2.3 percent, to $1,383 an ounce. Gold has fallen sharply this year as a rising stock market and a strengthening dollar have diminished its appeal as an alternative investment.
In other commodities trading, the price of oil rose $1.27, or 1.3 percent, to $96.03 a barrel.
Among other stocks making big moves:
-- Gap rose $1.11, or 2.7 percent, to $42.09. The San Francisco-based clothing store chain reported late Thursday that its sales jumped 7 percent in May, more than expected, helped by strong results at its namesake Gap and Old Navy stores.
-- TiVo plunged $2.61, or 19 percent, to $11.10 after the company settled patent disputes with several technology companies including Cisco and Motorola Mobility but received far less than what most investors inspected. TiVo has posted annual losses in nearly all of the past 10 years.
-- Thor Industries rose $4.92, or 11.9 percent, to $46.16 after the company reported a 6 percent increase in income. The results beat market expectations on stronger sales of RVs and a lower tax rate.