Stocks closed their best week in a month on Friday, shrugging off tepid jobs growth in a sign that the rally may have further to run.
Late in the day, stocks gained after reports that Federal Reserve Chairman Ben Bernanke said in a CBS television interview recorded on November 30 that he does not rule out more than the announced $600 billion in Fed asset purchases. The interview with 60 Minutes has yet to be televised.
The S&P 500 rose 3 percent this week, as investors were reassured by signs the economy is stabilizing and have taken a more optimistic view of Europe's debt crisis. This has helped push the S&P 500 close to a new two-year high. The Nasdaq rose to nearly a three-year high.
We're within 5 to 6 points on the S&P of brand-new recovery cycle highs, said Jim Paulsen, chief investment officer at Wells Capital Management, in Minneapolis. If it does break through, there is a lot of room to the upside.
Despite a modest day for major averages, the PHLX Semiconductor Index and the Dow Jones Transportation Average touched 52-week highs, a positive sign as both are viewed as market bellwethers.
Paulsen said the jobs number was such an outlier that it did not shake investors' new-found confidence in the economic recovery.
The economic momentum is not doused by what we got this morning, he said. But he added, If data reports start going weak in the next few weeks, then this jobs number is going to get a lot more attention.
Volume was at its lowest level this week, according to early data, and was well below its daily average so far this year.
But the market's breadth was overwhelmingly positive on both the New York Stock Exchange and the Nasdaq, where about eight stocks rose for every five that fell.
The Dow Jones industrial average rose 19.68 points, or 0.17 percent, to end at 11,382.09. The Standard & Poor's 500 Index added 3.18 points, or 0.26 percent, to 1,224.71. The Nasdaq Composite Index gained 12.11 points, or 0.47 percent, to close at 2,591.46.
On Friday, the Nasdaq finished at its highest level since early January 2008.
ALCOA AND BANKS RISE, VIX FALLS
Commodity-related shares benefited from a weaker dollar, which declined after the jobs report. Aluminum company Alcoa Inc gained 1 percent to $14.22.
Financials, which had their biggest day in three months on Thursday, extended gains late in Friday's session. The KBW bank index rose 0.8 percent.
Employment barely grew in November. Nonfarm payrolls rose by only 39,000, much weaker than the 140,000 new jobs that economists forecast. The U.S. unemployment rate unexpectedly jumped to a seven-month high of 9.8 percent, the Labor Department said.
But recent data, including retail sales and other labor reports, have raised optimism the recovery remains on track after hitting a soft patch in the summer when fears of a double-dip recession drove stocks sharply lower.
Investors also said the Federal Reserve would be less likely to cut stimulus to the economy while employment remained weak.
The lack of investor alarm over the jobs report was reflected in the CBOE Volatility Index, or VIX, known as Wall Street's fear gauge, which shed 7.1 percent to 18.01
The S&P 500 faced strong technical resistance at about 1,228, near a recent high of more than two years and also the 61.8 percent Fibonacci retracement of the index's slide from October 2007 to March 2009, a key technical indicator.
Paulson said that traders wanted to stay positioned for a potential year-end rally if stocks break through resistance.
Support for the benchmark kicks in at 1,200, which was recently a stubborn resistance point, and the top end of its recent trading range, and near 1,195, its 10-day moving average.
Also helping to curb stocks' decline was the euro's gain on Friday of more than 1 percent against the U.S. dollar to $1.3422. In recent weeks, the euro's moves have been tightly coupled with U.S. and global equities.
In company news, U.S.-based mining group Walter Energy Inc agreed to buy Canada's Western Coal Corp for about $3.25 billion to create the world's leading metallurgical coal producer. Walter added 4.7 percent to $110.52.
Combined volume on the New York Stock Exchange, Amex and Nasdaq was 6.87 billion, compared with a daily average of 8.47 billion so far this year.
(Reporting by Edward Krudy; Editing by Jan Paschal)