Stocks rose Friday, with the major market indexes notching their biggest weekly gains since October 2003, as investors welcomed a surprisingly strong report on the U.S. job market and set aside worries on the potential for higher interest rates.

The Dow Jones industrial average (search) ended up 97.26 points, or 0.94 percent, at 10,470.59. The Standard & Poor's 500 Index (search) rose 9.63 points, or 0.85 percent, to 1,141.80. The technology-laced Nasdaq Composite Index (search) gained 42.16 points, or 2.09 percent, to 2,057.17.

For the week, the Dow rose 2.5 percent, the S&P 500 was up 3 percent, while the Nasdaq gained 4.93 percent.

The unexpected jump in March U.S. non-farm payrolls — almost triple the number that Wall Street expected — reassured investors that the long-suffering job market has emerged from a slump and the economic rebound is firmly on track.

About 308,000 jobs were created in March, the fastest pace in nearly four years, according to the Labor Department (search), far outstripping economists' forecasts for a gain of about 103,000. The unemployment rate ticked up to 5.7 percent from the 2-year low of 5.6 percent seen in January and February.

"This report was a sigh of relief for the market and shows the economic recovery is sustainable," said Cary Nordan, vice president at BB&T Asset Management in Raleigh, North Carolina.

"Anxiety was building that the economy was slowing down and obviously, would impact stock valuations, but this report gives the economy a much needed boost for the second quarter and, hopefully, the rest of the year," Nordan said.

U.S. bond prices sank and the dollar shot higher in response to the jobs data.

Investors will likely look forward to earnings season with more confidence, but the specter of interest rate hikes will keep any rise in the markets relatively tame, said Joseph Battipaglia, chief investment officer at Ryan Beck & Co.

"Now, you'll see people turn their attention to interest rate worries and perhaps being somewhat cautious about the market," Battipaglia said. "That's a healthy process for the market."

Still, most analysts believe that interest rate hikes are months away.

"Once the Fed starts tightening rates, either late this year or early next year, the increases could come pretty rapidly, in rapid succession," said Stuart Schweitzer, global markets strategist at JP Morgan Fleming Asset Management. "But for now, I think the good news we got today is just that — good news."

Trading was quite heavy, with 1.6 billion shares changing hands on the New York Stock Exchange, above the 1.4 billion daily average for last year. About 2.2 billion shares were traded on Nasdaq, well ahead of the 1.8 billion daily average last year.

Job gains were widespread across a wide range of industries. Investors also viewed upward revisions in January and February payrolls, which were revised up by a combined 87,000 jobs, as signs pointing to a lasting recovery.

Financial, construction and home improvement stocks fell on fears that the spike in jobs will soon lead to higher interest rates, sapping the mortgage market.

"We saw a classic rotation out of interest-rate-sensitive stocks into technology," said Owen Fitzpatrick, managing director at Deutsche Bank Private Wealth Management.

"On the flip side of the great news we got today, it raises in everyone's minds that it could push up the date of a potential interest-rate hike by the Fed."

Home products retailer Home Depot Inc. (HD) dropped 40 cents to $36.68, home builder Pulte Homes Inc. (PHM) fell $2.63 to $52.87, and mortgage banker Countrywide Financial Corp. fell $4.79 to $91.25.

But employment services stocks like Monster Worldwide Inc. (MNST) and Robert Half International Inc. (RHI)surged after the jobs report.

Monster Worldwide shares jumped $1.97, or 7.5 percent, to $28.26, while those of Robert Half soared $1.32, or 5.5 percent, to $25.24.

Microsoft Corp. (MSFT) was the biggest contributor to gains in the Standard & Poor's 500. Microsoft Corp. and rival Sun Microsystems Inc. (SUNW) ranked among the Nasdaq's most actively traded stocks after they settled a long-standing legal battle over patents and unfair competition.

Microsoft shares rose 3 percent or 77 cents to $25.85, while those of Sun Micro shot up 20.8 percent, or 87 cents, to $5.06 on news of their legal settlement.

Alcoa Inc. (AA), which kicks off corporate America's quarterly earnings season when it reports results next week, was the blue-chip Dow's biggest percentage gainer. The world's No. 1 alumina maker finished up $1.27, or 3.7 percent, at $35.90. The company, a bellwether of U.S. manufacturing, is the first Dow component to report results next week. Its earnings are due on Tuesday.

 

Gateway Inc. (GTW) climbed 66 cents to $6.06 a day after it announced it is cutting 2,500 jobs and closing its 188 retail stores around the country.

Advancers outnumbered decliners by a ratio of 17 to 15 on the NYSE and 11 to 5 on the Nasdaq.

The Russell 2000 index of smaller companies was up 8.13, or 1.4 percent, at 603.45.

Overseas, Japan's Nikkei stock average rose 1.1 percent. Britain's FTSE 100 gained 1.2 percent for the session, France's CAC-40 closed up 1.9 percent and Germany's DAX index jumped 2.1 percent.

Reuters and the Associated Press contributed to this report.