Stocks rose on Friday after data showed the U.S. jobless rate dropped to a 2-1/2 year low and as European policymakers again appeared ready to collaborate in tackling the region's debt crisis.

U.S. companies stepped up hiring and the jobless rate dropped to 8.6 percent from 9 percent, further evidence an economic recovery was gaining momentum.

Overall this is an encouraging report on the labor market, said David Resler, chief economist at Nomura Securities in New York. But we shouldn't get too excited that we're going to see four-tenths of a percent decline in the unemployment rate very often.

The Dow Jones industrial average advanced 119.54 points, or 0.99 percent, at 12,139.57. The Standard & Poor's 500 Index was up 15.04 points, or 1.21 percent, at 1,259.62. The Nasdaq Composite Index put on 31.90 points, or 1.21 percent, at 2,658.10.

Equities also got a boost after Bloomberg cited sources as saying the European Central Bank was gearing up to lend as much as 200 billion euros ($270 billion) to the International Monetary Fund in a bid to ease the debt crisis.

Earlier this week, officials told Reuters at a euro zone finance ministers' meeting that they had not fixed a figure for a possible increase in funds for the IMF.

German Chancellor Angela Merkel reiterated her strong support for the euro, and called for rapid European Union treaty changes to remedy the root causes of the euro zone's debt crisis. But she warned that Europeans faced a long, hard marathon to restore lost credibility.

U.S.-listed shares of Research in Motion Ltd. dropped 8.7 percent to $16.95 after the BlackBerry maker said it will record a pretax charge to write down the value of its poorly received PlayBook tablet computer.

Google Inc. rose 1.1 percent to $620.77 after the Wall Street Journal reported the Internet group was pondering an Internet service to help consumers shop online with one-day delivery service to cut the loss of Web traffic to Amazon.com Inc.

(Reporting by Angela Moon; editing by Jeffrey Benkoe)