Stocks rose sharply Friday as investors opted to focus on the bright side of a rather lukewarm jobs report, betting that the data should keep the Federal Reserve (search) from raising interest rates any time soon.

The Nasdaq Composite Index (search) surged 44.45 points, or 2.2 percent, to 2,064.01, notching its biggest daily percentage gain since late November. The Dow Jones industrial average (search) rose 97.48 points, or 0.93 percent, to 10,593.03. The broader Standard & Poor's 500 Index (search) gained 14.17 points, or 1.26 percent, to 1,142.76.

For the week, both the Dow and the S&P 500 registered gains of 1 percent. But the Nasdaq fell 0.10 percent, marking its third down week in a row as it was unable to overcome a big drop earlier in the week sparked by a cautious outlook from Cisco Systems Inc.

The Labor Department (search) reported the unemployment rate fell 0.1 percent to 5.6 percent last month to its lowest level since October 2001. The economy created 112,000 new jobs in January, and while analysts and economists had been expecting a higher number, the report was enough to motivate buyers who had been dormant for more than two weeks.

"It's a Goldilocks report — not too hot and not too cold," said Hugh Johnson, chief investment officer at First Albany Corp. "When you have interest rates declining and stock prices rising, like we do today, you get a great return on a balanced portfolio."

Although the new job figure wasn't as high as the 150,000 to 175,000 pundits had hoped for, the economy hadn't created as many jobs in a single month since December 2000, near the peak of the last bull market.

"There were some solid gains in the report," Johnson said. "You can no longer characterize the current recovery as a jobless recovery. It's a job-creating recovery."

Furthermore, the lower-than-expected job creation could be a boon to investors fearing an interest rate increase by the Federal Reserve, as well as those who have part of their portfolio in bonds.

However, investors should think about a move to large-cap stocks, since small- to mid-caps could suffer if the dollar continues to weaken, according to Kevin Caron, market strategist at Ryan, Beck & Co.

"With the global economy accelerating in 2004, the large-caps will be able to take full advantage of that, whereas the smaller companies don't have the resources, especially with the weak dollar," Caron said. "There's still some room for positive surprises in earnings in the first and second quarters, however."

In the meantime, strong first-quarter earnings reports added fuel to the session's buying.

Intel Corp.(INTC)  and Caterpillar Inc. (CAT) led the Dow higher, while U.S.-traded shares of Swedish telecommunications equipment maker Ericsson gave technology issues a lift.

On the downside, U.S. health insurer Cigna Corp. (CI) said it would cut about 9 percent of its work force after its membership ranks fell sharply in the fourth quarter. It posted a fourth-quarter net profit but said it would slash its quarterly dividend.

Cigna fell $5.55, or 8.9 percent, to $56.55.

The technology sector picked up momentum from the U.S.-traded shares of Swedish telecoms equipment maker Ericsson after it reported surprisingly strong fourth-quarter profits and signaled a return to growth in 2004 with healthier margins. Its ADRs jumped $3.07, or almost 13 percent, to $26.77.

Technology shares also got a boost from Maxim Integrated Products Inc. (MXIM), a supplier of analog microchips used in a variety of electronics. Maxim reported a higher quarterly profit Thursday and said it has accelerated its production schedule by about nine months in response to increasing demand.

Maxim rose $3.76, or 7.7 percent, to $52.48.

General Motors Corp. (GM) added 13 cents to $48.64 despite saying it would recall 1.8 million cars to repair ignition switches that could cause a fire.

McDonald's Inc. (MCD) posted a 19 percent increase in January sales despite the mad cow disease discovery. Shares were up 46 cents at $27.16.

Electronic Data Systems Corp. (EDS), one of the rare decliners, fell $1.39 to $21.90 after swinging to a loss in the fourth quarter even though it managed to beat analysts' expectations before one-time charges.

Volume was active with 1.46 billion shares traded on the New York Stock Exchange and 1.85 billion changing hands on the Nasdaq. Advancers outnumbered decliners by about 3 to 1 on the NYSE and the Nasdaq.

The Russell 2000 index of smaller companies was up 14.53, or 2.6 percent, at 584.07.

Overseas, Japan's Nikkei stock average closed flat. In Europe, Britain's FTSE 100 and France's CAC-40 both closed 0.4 percent higher, while Germany's DAX index gained 0.8 percent for the session.

Reuters and the Associated Press contributed to this report.