Stocks showed a strong upward move over the course of the trading day on Friday, with the major averages ending notably higher after seeing some early volatility. The markets benefited from better than expected jobs data and a positive reaction to the results of the financial stress tests.

Before the start of trading, the Labor Department released a report showing that employment fell by 539,000 jobs in April following a revised decrease of 699,000 jobs in March. The decrease in employment marked the smallest drop in jobs since October of 2008.

While the decrease was smaller than the loss of 600,000 jobs expected by economists, upward revisions to the number of job losses in February and March partly offset some of the optimism about the labor market.

The Labor Department also said that the unemployment rate rose to 8.9 percent in April from 8.5 percent in March. With the increase, which came in line with economist estimates, the unemployment rate rose to a new 25-year high.

However, Chris Low, the chief economist at FTN Financial, noted, Even the four-tenths rise in the unemployment rate was less than the five tenths rise in March. And so the discussion shifts from 'recession or recovery' to 'strong recovery, or weak?'

Traders also reacted positively to the official results of the government's stress tests of the nation's 19 largest financial firms, which were released after the close of trading on Thursday.

U.S. bank regulators said about half of the country's biggest financial institutions need to improve their capital positions in order to ensure that they can weather a further downturn in the economy.

The results of the stress tests showed that 10 of the 19 banks tested need to raise a total of $74.6 billion. The banks involved in the exercise account for two-thirds of the assets and more than half of the loans in the U.S. banking system.

Regulators determined that Bank of America (BAC), Wells Fargo (WFC), and Citigroup (C) are among the companies that need to improve their capital position, while Goldman Sachs (GS) and JP Morgan (JPM) are among those that don't need additional funding.

Commenting on the results of the stress tests in an interview with RTT News, Chuck Lieberman, chief investment officer for Advisors Capital Management, said, You never can surely close the door completely, but he believes the worst is over for banks.

If nothing else, investors should be pretty comfortable with the sense that the government is going to have to stand behind these companies, he added.

In other news, Dow component McDonald's (MCD) closed up 2.9 percent after the fast food giant said its global comparable sales rose 6.9 percent in April. The company also said systemwide sales fell 1.0 percent due largely to the stronger dollar.

The major averages closed firmly in positive territory, although off their best levels of the day. The Dow closed up 164.80 points or 2 percent at 8,574.65, the Nasdaq closed up 22.76 points or 1.3 percent at 1,739.00 and the S&P 500 closed up 21.84 points or 2.4 percent at 929.23.

With today's gains, the major averages all closed higher for the week, with the Dow and the S&P 500 setting four-month closing highs. While the Dow and the S&P 500 posted weekly gains of 4.4 percent and 5.9 percent, respectively, the Nasdaq rose a more modest 1.2 percent.

Sector News

With traders reacting positively to the government stress test results, banking stocks turned in some of the market's best performances. The Kbw Bank Index closed up 12.1 percent, ending the session at a four-month closing high.

Fifth Third Bancorp (FITB) helped to lead the sector higher, with the regional bank closing up 58.7 percent. Huntington Bancshares (HBAN), Marshall & Ilsley (MI), and Zions Bancorp (ZION) also posted notable gains.

Housing stocks also moved sharply higher over the course of the trading day after seeing some weakness in recent sessions, driving the Philadelphia Housing Index up 5.5 percent. Within the sector, Radian Group (RDN) rose 25.5 percent to a two-month closing high.

Considerable strength was also visible among resource stocks, which moved higher along with commodities prices. Oil service stocks posted particularly strong gains, as crude for June delivery closed up $1.92 at $58.63 a barrel.

Most of the other major sectors also showed strong upward moves, with some real estate, brokerage, and defense stocks posting notable gains.

Meanwhile, semiconductor stocks were among the few groups to buck the uptrend, dragging the Philadelphia Semiconductor Index down 1.9 percent. Among semiconductor stocks, Nvidia (NVDA) fell 13.8 percent after reporting a first quarter loss versus a year-ago profit.

Dow Components

A vast majority of the Dow components ended the day in positive territory, contributing to the substantial gain posted by the blue chip index. Of the thirty Dow components, only six closed below the unchanged line.

Financial stocks turned in some of the Dow's best performances, with credit card giant American Express (AXP) showing a notable upward move. Shares of American Express closed up 9.4 percent, at a six-month closing high.

JP Morgan, Citigroup, and Bank of America also posted significant gains, reflecting the positive reaction to the stress test results.

Boeing (BA) also showed a strong upward move on the day, with the aerospace giant closing up 5.3 percent to set a four-month closing high. Caterpillar (CAT) and General Electric (GE) were among the other Dow components that posted notable gains.

On the other hand, shares of Intel (INTC) closed down 3 percent, reflecting the weakness in the semiconductor sector. Merck (MRK) and IBM (IBM) also posted notable losses on the day.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region closed mostly higher on Friday, reacting positively the U.S. stress test results. Japan's benchmark Nikkei 225 Index closed up 0.5 percent, at a six-month closing high.

European stocks also turned in strong performances, although they ended the session off their best levels of the day. The U.K.'s FTSE 100 Index rose 1.4 percent, while the French CAC 40 Index and the German DAX Index closed up 1.9 percent and 2.3 percent, respectively.

In the bond market, treasuries showed a lack of direction over the course of the trading day, with the benchmark ten-year note bouncing back and forth across the unchanged line. The yield on the ten-year note eventually closed nearly flat 3.293 percent.

Looking Ahead

Economic data is likely to attract some attention next week, with reports on retail sales, producer and consumer price inflation, and industrial production likely to be in focus. Traders are also likely to keep a close eye on the weekly jobless claims report.

Retail stocks could see increased activity, as a number of big-name retailers are due to release their quarterly results, including Wal-Mart (WMT), J.C. Penney (JCP), Macy's (M), and Abercrombie & Fitch (ANF).

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