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Stocks rally on payrolls, denting 2nd weekly loss

U.S. stocks surged on Friday, with the Dow industrials jumping 200-plus points, after a better-than-projected payrolls report bolstered a positive view of the U.S. economy.

"You couldn't ask for a better-looking jobs report. The market had been getting a bit frazzled; this is the kind of report that eases those concerns," said Jeff Greenberg, senior economist at J.P. Morgan Asset Management.

And, "the fact that we are seeing an acceleration in jobs growth makes them (Federal Reserve officials) very comfortable ending quantitative easing later this month," added Greenberg, referring to the central bank's asset purchases, on track to end in late October.

The government reported the U.S. jobless rate fell to 5.9 percent in September and companies added 248,000 in payrolls after a 180,000 hike the prior month, more than previously estimated.

"Bring out the party hats, not only today's number, but the adjustments for August are a positive," said JJ Kinahan, chief strategist at TD Ameritrade, who noted jobs creation was broad-based, with business services, retail services, health care and construction the sectors seeing the most growth.

"There is not a lot to criticize here, as everything is really positive. If you're looking for a fault somewhere, hourly earnings were basically flat," said Kinahan.

Mike Arone, a strategist at State Street Global Advisors, argued that low-pay growth is "good for the market as inflation expectations remain well anchored," allowing the Federal Reserve to continue its current monetary policy.

"The economy could handle higher compensation, but for the markets, it's an unequivocal positive: corporate profit margins can remain wide and monetary policy can remain accommodative," offered Greenberg.

The CBOE Volatility Index, a gauge of uncertainty, dropped 10 percent as investors fled perceived safe-havens including U.S. Treasury bonds and gold, which fell below $1,200 an ounce for the first time this year.

"Gold has been replaced as a harbor-of-safety investment by the U.S. dollar. And we're in the early innings of the dollar-strength story, which is not a positive for gold," said Art Hogan, chief market strategist at Wunderlich Securities

Other economic reports had the U.S. trade deficit unexpectedly narrowing in August as exports climbed to a record.

And the Institute for Supply Management said its service index fell to 58.6 in September from 59.6 the month before, with last month's reading better than the expected 58.5 estimate.

JPMorgan Chase gained, a day after disclosing a security breach that impacted about 76 million households.

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Halting a four-session streak of losses, the Dow Jones Industrial Average jumped as much as 226 points, and finished up 208.64 points, or 1.2 percent, to 17,009.69, with Goldman Sachs Group leading blue-chip gains that extended to 29 of 30 components. The Dow closed 0.6 percent down from the week-ago close.

Down 0.8 percent from last Friday's close, the S&P 500 advanced 21.73 points, or 1.2 percent, to 1,967.90, with health care financials the best performing and all 10 major sectors in positive terrain.

The Nasdaq climbed 45.43 points, or 1 percent, to 4,475.62, leaving it with a weekly loss of 0.8 percent.

For every share falling, just over two gained on the New York Stock Exchange, where 812 million shares traded. Composite volume neared 3.6 billion.

The dollar advanced against the currencies of major U.S. trading partners and the yield on the 10-year Treasury note used to figure mortgage rates rose a basis point to 2.438 percent.

On the New York Mercantile Exchange, oil futures for November fell $1.27, or 1.4 percent, to $89.74 a barrel, and the December gold contract dropped $22.20, or 1.8 percent, to $1,192.90 an ounce.

On Thursday, U.S. stocks finished little moved, with smaller companies rebounding after dropping into corrective mode the prior day, as investors mulled an unexpected drop in weekly jobless claims ahead of the monthly payrolls report.

"The key to the recovery is jobs and the economy keeps creating new jobs. The market needed something tangible; this is a strong start heading into what could be a good earnings season," said Jack Ablin, chief investment officer at BMO Private Bank.

Alcoa next week marks the unofficial start of the earnings season, with the aluminum producer slated to report third-quarter results on Wednesday.