* October payrolls well above expectations
* Santarus jumps on buyout deal, acquirer Salix also up
* Prices for U.S. Treasuries slump as payrolls jump past expectations
* Indexes up: Dow 0.6 pct, S&P 0.9 pct, Nasdaq 1.3 pct
NEW YORK, Nov 8 (Reuters) - U.S. stocks rose on Friday, rebounding from the previous session's selloff, after an unexpectedly strong payrolls report lent weight to views the world's largest economy is stronger than previously thought.
Friday's advance set the Dow and S&P on track for their fifth straight week of gains. For the week, the Dow was up 0.5 percent and the S&P 500 index was up 0.1 percent.
"The focus has been heavily on whether the economy is seeing some growth, and while the initial reaction to the jobs report was about the Fed tapering or tightening policy, people are seeing the positive aspect of growth," said Rick Meckler, president of investment firm LibertyView Capital Management in Jersey City, New Jersey.
"Another reason why the market is moving higher is ... a lack of alternatives. As much as investors want to take profits, considering how far this market has come, the short-term rates remain low and there is a risk of putting money into fixed income."
The strong jobs report - 204,000 new jobs were created last month, much more than the expected 125,000 - came before the market open and initially pressured futures because it increased chances the Federal Reserve could begin to scale back its stimulus before the end of the year.
The strong data also sent U.S. Treasuries prices lower, lifting the benchmark 10-year yield to its highest in more than three weeks. A four-month rally in yields earlier this year pressured stocks, but the recent strong data has eased concerns over higher borrowing costs.
"Most people in the market believe in the next couple years the 10-year yield will return to a 3-to-4 percent level, and a market trading at 17 times earnings is cheap still, in that environment," said Eric Kuby, chief investment officer at North Star Investment Management Corp in Chicago.
The most recent trailing price-to-earnings ratio on the S&P 500 is 16.2 according to Thomson Reuters data, with the forward P/E at 14.8.
The Dow Jones industrial average was up 97.35 points, or 0.62 percent, at 15,691.33. The Standard & Poor's 500 Index was up 15.95 points, or 0.91 percent, at 1,763.10. The Nasdaq Composite Index was up 48.72 points, or 1.26 percent, at 3,906.05.
Financial stocks led the charge on the S&P 500 with a 1.8 percent advance, following a more than 1 percent drop in the sector on Thursday and on the expectation that higher rates will translate into stronger earnings.
JPMorgan Chase added 3.9 percent to $53.68 while Wells Fargo, Bank of America and Citigroup were all up more than 2 percent.
On the other hand, homebuilders, seen getting hurt if mortgage rates rise sharply, were lower. Shares of Lennar , Ryland Group and Pulte Homes fell more than 4 percent each.
Apparel retailer Gap's shares led percentage gains on the S&P 500 with a 9 percent advance a day after it posted October same-store sales well ahead of analysts' estimates.
Santarus Inc surged 37.8 percent to $32 after Salix Pharmaceuticals Ltd agreed to buy the drugmaker for about $2.6 billion. Salix shares jumped 18 percent to $84.14.
Twitter shares fell 7.1 percent to $41.70 a day after its NYSE debut. Shares had rallied 72.7 percent Thursday, though they closed slightly below the opening print of $45.10.
Other economic data showed consumer spending rose 0.2 percent after advancing 0.3 percent in August, in line with expectations.
The Thomson Reuters/University of Michigan's preliminary reading on consumer sentiment fell to 72.0 in November, its lowest since December 2011 and below both October's final reading of 73.2 and the 74.5 forecast.