NEW YORK -- An unexpectedly strong jobs report gave stocks a lift on Friday, pushing the Dow Jones industrial average back to an all-time high.
The gains were led by banks, such as Bank of America and JPMorgan Chase, which stand to benefit from a pickup in lending as the economy strengthens. Consumer-focused stocks such as Priceline.com and Disney also rose after reporting higher profits, and Gap soared after raising its earnings forecast. Losers included housing stocks and Twitter, which dropped 7 percent the day after its initial public offering.
The jobs survey left investors grappling with how to interpret this week's surprisingly strong economic data and what it means for the Federal Reserve's economic stimulus program. On Thursday the government reported that U.S. economic growth accelerated in the third quarter. The Fed's stimulus has helped power this year's stock rally.
"We're walking a tight wire with the Fed," said Rob Lutts, Chief Investment Officer at Cabot Money Management. Lutts said the job survey was positive because it showed the economy was improving, but perhaps not strongly enough to assure that Fed policymakers will pull back on its bond-buying program before the end of year.
The Dow gained 167.80 points, or 1.1 percent, to 15,761. The Dow also closed at a record high on Wednesday.
The Standard & Poor's 500 index ended 23.46 higher, or 1.3 percent, at 1,770.61, just a point below its record. The Nasdaq composite rose 61.90 points, or 1.6 percent, to 3,919.23.
Both the Dow and the S&P 500 recovered all of their losses from Thursday, when concern about the Fed withdrawing its stimulus outweighed optimism about faster economic growth.
The reaction to the jobs report was even more pronounced in the bond market. The yield on the 10-year Treasury note jumped to the highest in six weeks as investors sold bonds, anticipating less demand for them if the Fed slows its purchases. Rising interest rates are a sign that investors are more confident in the economy. They are a boon to banks because it means that they can lend money at higher rates.
The yield on the 10-year note jumped to 2.75 percent from 2.60 percent on Thursday, the highest level since Sept. 20. JPMorgan Chase rose $2.31, or 4.5 percent, to $53.96. Bank of America gained 52 cents, or 3.8 percent, to $14.32.
Housing stocks were among the biggest decliners on Friday.
Higher Treasury yields lead to higher mortgage rates, and that in turn can hurt demand for homes. Lennar fell $1.45, or 4.2 percent, to $32.79. PulteGroup dropped 66 cents, or 3.8 percent, to $16.85.
The government reported that U.S. employers added 204,000 jobs in October, an unexpected burst of hiring during a month in which the federal government was partially shut down for 16 days. The job additions were far greater than the 130,000 economists were expecting, according to FactSet, a financial data provider.
The jobs report was the second piece of unexpectedly robust economic news that Wall Street received in the past two days. The Commerce Department said Thursday that the U.S. economy grew at a 2.8 percent annualized rate in the third quarter, better than the 2.5 percent rate economists were looking for.
The Federal Reserve has been buying $85 billion worth of bonds each month since last December to keep long-term interest rates low and encourage hiring and borrowing. The program has also helped drive up stock prices by making bonds look expensive by comparison.
Some analysts say the impact of the Fed's stimulus on the stock market's rise has been overstated, compared to factors such as rising corporate earnings. Removing the stimulus would likely benefit the economy by eliminating one of the uncertainties facing U.S. businesses, said Liz Ann Sonders, chief investment strategist at Charles Schwab.
"It's time we rip the Band-Aid off," Sonders said. "If it's the data that supports it, all the better."
Almost 90 percent of the companies in the S&P 500 have reported their results for the third quarter, and their earnings are forecast to have grown 5.6 percent in the period. That compares with growth of 4.9 percent in the second quarter and 2.4 percent in the same period a year ago.
Among other stocks making big moves:
-- Gap rose $3.68, or 9.7 percent, to $41.43 after the retailer reported solid gains in sales for October and gave an upbeat profit forecast for its third quarter.
-- Priceline rose $50.31, or 4.9 percent, to $1,073.20 after the online booking company said its profit rose 40 percent in the third quarter, as bookings for flights, rental cars and hotels rose.
-- Walt Disney rose $1.43, or 2.1 percent, to $68.53 after the company's earnings rose 12 percent in its fiscal fourth quarter, beating analysts' expectations.
-- Twitter fell $3.25, or 7.2 percent, to $41.65 on the social media company's second day of trading. The stock surged 73 percent above its IPO price on Thursday.