More evidence that the economy is gaining strength followed the jobs report. The government said factory orders rose 1.1 percent in December - the fastest pace in seven months - supported by a rebound in orders for heavy machinery and autos. And a trade group said the service industry, including stores, hotels, and restaurants, expanded at its fastest pace since last February. That survey's employment index soared to its highest level in nearly six years.
The Nasdaq index closed 45.98 points higher at 2,905.66, its highest since December 2000, during the steep decline that followed the dot-com stock bubble.
The price of ultrasafe Treasury notes dropped, sending yields higher, and the price of oil rose for the first time in a week.
"In this economy, only one variable matters right now, and that variable is employment," said Lawrence Creatura, an equity portfolio manager at Federated Investors. "This report was great news. It was beyond all expectations, literally. The number was higher than even the highest forecast."
The Standard & Poor's 500 index added 19.36 points, or 1.3 percent, to 1,344.90, its highest close since last July. The S&P 500 surged 2.2 percent for the week, its fifth straight week of gains. That's the longest weekly winning stretch since January of 2011.
Bank of America led the 30 stocks in the Dow, rising 5.2 percent. Only two stocks were lower: Merck and Procter & Gamble.
Treasury prices fell, lifting the yield on the 10-year note to 1.93 percent. When bond prices fall, yields rise. The benchmark 10-year rate had traded below 1.79 percent earlier this week as traders bought U.S. Treasurys on renewed concern over Europe's ongoing debt crisis.
The U.S. jobs figures helped markets in Europe rally on Friday despite further evidence that the 17-country eurozone is heading for recession. Germany's DAX closed 1.7 percent higher, and France's CAC-40 gained 1.5 percent.
Genworth Financial soared 14 percent, the best gain in the S&P 500. The insurance company reported late Thursday that it swung to a profit in the most recent quarter.
Weyerhaeuser gained 5.7 percent, and video game maker Take-Two Interactive Software Inc. rose 3 percent. Both companies saw earnings sink, but their numbers beat forecasts.
