Stocks rose on Friday after the government's stress test results on big banks increased optimism about financial stocks, and data showed employers cut fewer-than-expected jobs in April.

U.S. regulators told top banks after the close on Thursday to raise $74.6 billion to build a capital cushion that officials hope will restore faith in financial companies and set a course out of the deepest recession in decades.

Several of the large banks have announced equity and debt offerings in an attempt to raise capital.

The 539,000 jobs cut by employers in April was the smallest reduction since October, and hinted at some improvement in the labor market, but the unemployment rate soared to 8.9 percent, the highest since September 1983.

The results came out and it was less (capital) need than feared, and even less need than generally expected, said Tim Ghriskey, chief investment officer of Solaris Asset Management in Bedford Hills, New York

It shows that the banking system is not only solvent, but improving and well capitalized.

The Dow Jones industrial average <.DJI> gained 123.70 points, or 1.47 percent, to 8,533.55. The Standard & Poor's 500 Index <.SPX> rose 15.50 points, or 1.71 percent, to 922.89. The Nasdaq Composite Index <.IXIC> added 9.55 points, or 0.56 percent, to 1,725.79.

Shares of several major banks rose, with JPMorgan Chase Inc up 6.3 percent at $37.45 and Citigroup Inc

up 8.7 percent at $4.14.

The KBW Bank index <.BKX> jumped 9.6 percent.

Bank of America Chief Executive Kenneth Lewis said in an interview on CNBC that he anticipates about $10 billion in asset sales and that he is pretty confident the bank will do better than the stress test results indicate. Bank of America's stock shot up 5 percent to $14.19.

Activision Blizzard Inc gave the Nasdaq its biggest boost, up 9 percent at $11.99 after the video-game maker posted quarterly results that topped Wall Street's estimates and raised its 2009 forecast.

McDonald's Corp shares rose 2.9 percent to $54.93 and was one of the Dow's major advancers after the fast-food restaurant said global comparable sales rose 6.9 percent for April, with a 6.1 percent rise in U.S. comparable sales.

Crude oil futures prices jumped above $58 a barrel and bolstered energy shares, as Chevron gained 3.4 percent to $70.32, while Exxon Mobil added 2.7 percent to $70.80 and helped lift the blue-chip index.

The Nasdaq remains on track for its ninth straight weekly advance, the longest such streak for the index since an 11-week climb at the end of 1999.

Since hitting a 12-year closing low in March, the S&P has surged 36.4 percent, driven by optimism about the financial system's condition and hopes the recession may be waning.

(Reporting by Chuck Mikolajczak; Editing by Jan Paschal)