U.S. blue-chip stocks surged on Friday to their highest level in more than 3-1/2 years after a better-than-expected jobs report, and bonds rallied as the report soothed worries about inflation.
"The catalyst for the (stock) rally today is the payroll report," said Brian Pears, head of equity trading at Victory Capital Management. "I think that most traders thought the economy was in relatively good shape, but this gives us an inkling that the economy is even stronger than we thought."
February's jobs creation of 262,000 was the biggest gain in four months, the U.S. Labor Department said. The jobs gain boosted sentiment about the economy, while inflationary worries were soothed by a static hourly earnings rate.
Hourly earnings were unchanged at $15.90 after a 5-cent gain in January.
The Dow closed at its highest level since June 2001, putting it within 60 points of the psychologically important 11,000 mark, while the S&P 500 closed at its highest since July 2001.
The Dow Jones industrial average was up 107.52 points, or 0.99 percent, to end at 10,940.55.
The Standard & Poor's 500 Index was up 11.65 points, or 0.96 percent, to finish at 1,222.12.
The Nasdaq Composite Index was up 12.21 points, or 0.59 percent, to close at 2,070.61.
Only three of the 30 Dow stocks closed lower.
For the week, the Dow was up 0.91 percent, the S&P 500 rose 0.89 percent, and the Nasdaq was up 0.25 percent.
Interest-rate sensitive stocks such as financials gained as fears were eased about aggressive rate increases. Citigroup Inc. was up nearly 1 percent, or 43 cents, at $48.40, and JP Morgan Chase and Co. was up 1.4 percent, or 50 cents, at $37.51.
High interest rates weigh on stocks as they increase the cost of borrowing for companies, and are particularly bad for financial services companies because they slow the lending volume while raising the cost of acquiring funds.