Stocks squeezed out small gains Friday after zigzagging in a tight range all day as investors were disappointed by the government jobs report, but expectations that the Federal Reserve may launch another round of quantitative easing helped limit losses.
Still, all three major averages posted sharp gains for the week.
"The perception of 'helping' the White House with further accommodation would be too powerful to overcome for the independent central bank, in my opinion," wrote Todd Schoenberger, managing principal at The BlackBay Group. "Well, the problem is, if the Fed does nothing next week and waits, the certainty of a double-dip recession becomes 100 percent."
The Dow Jones Industrial Average rose 14.64 points, or 0.11 percent, to close at 13,36.64, finishing higher for a seventh-straight Friday. BofA led the blue-chip gainers, while Kraft declined.
The S&P 500 climbed 5.80 points, or 0.40 percent, to end at 1,437.92. The Nasdaq eked out a gain of 0.61 points, or 0.02 percent, to finish at 3,136.42.
The CBOE Volatility Index, widely considered the best gauge of fear in the market, tumbled below 15.
For the week, the Dow rallied 1.65 percent, the S&P 500 jumped 2.23 percent, and the Nasdaq soared 2.26 percent. The S&P 500 and Nasdaq posted their best week in three months. All 10 S&P sectors finished in the black for the week, with financials and materials advancing more than 3 percent.
Non-farm payrolls gained only 96,000 in August, missing expectations for an increase of 125,000, according to the Labor Department. The unemployment rate declined to 8.1 percent from 8.3 percent, but the drop was largely attributed to people giving up looking for work.
The dismal report helps set the stage for Fed policymakers to provide additional stimulusto boost the struggling economy when they meet next week. The latest figures were also a blow to President Obama as he seeks re-election in November. (Read More: Which President Has Been the Best for Markets?)
“Today was going to be a win-win day for the market,” said Phil Orlando, chief equity strategist at Federated Investors. “The odds have now increased for more aggressive monetary policy at next week’s Fed meeting…and this weak number also suggests we may be getting a change in leadership in Washington, which will bring about more economically-friendly fiscal policy decisions next year.” (Read More: Probability of Fed Easing Above 50%—Hatzius)
Stocks surged nearly 2 percent across the board on Thursday, with the S&P 500 closing at its highest since 2008, fueled by the ECB's announcement it will purchases bonds of struggling euro zone countries to bring down their borrowing costs.
Also, China gave the green light for 60 infrastructure projectsworth more than $150 billion, or nearly 2 percent of the nation's economy, to boost growth.
Material stocks such as ArcelorMittal, Rio Tinto and Cliffs Natural Resources all surged.
Kraft Foods dropped to lead the Dow laggards after the food and beverage conglomerate said it expects long-term earnings growth in the mid-to-high single digits when it spins off its snacks business in October.
Among techs, Google gained to top $700 a share, hitting a four-year high.
Intel slumped after the chipmaker cut its third-quarter revenueforecast, citing softer demand due to the weak macroeconomic environment. At least seven brokerages lowered their price targets on the firm. Other semiconductor companies were also in the red, including Micron, AMD and Texas Instruments.
Apple has lowered its orders for memory chips for its new iPhone from its main supplier Samsung, as the tech giant seeks to diversify its supply lines, according to a source with direct knowledge of the matter. Separately, the iPhone maker hit an all-time high earlier in the session at $682.48 a share. Shares have shot up nearly 70 percent year to date.
Meanwhile, Pandora plunged after reports that Apple is in talks to license music for its own online radio service.
Amazon.com climbed to all-time highs a day after the online retailer launched a new Kindle Fire tablet and refreshed its line of stand-alone e-readers. At least two brokerages raised their price targets on the firm. (Read More: Why Kindle Fire HD Won’t Hurt Apple Much...Yet)
Lululemon jumped after the yoga-apparel retailer posted higher earnings and lifted its full-year profit and revenue outlook.
—By CNBC’s JeeYeon Park (Follow JeeYeon on Twitter: @JeeYeonParkCNBC)
On Tap Next Week:
MONDAY: Consumer credit, Annie's shareholder mtg
TUESDAY: NFIB small business optimism index, McDonald's August sales, international trade, 3-yr note auction, Intel developers forum
WEDNESDAY: Weekly mortgage apps, import & export prices, wholesale trade, oil inventories, 10-yr note auction, crop outlook report, Apple iPhone 5 event, FOMC meeting begins
THURSDAY: Jobless claims, PPI, 30-yr bond auction, FOMC mtg announcement, FOMC forecasts, Bernanke press conference; Earnings from Pier 1 Imports
FRIDAY: CPI, retail sales, industrial production, consumer sentiment, business inventories, FDA decision on Truvia
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