The latest rally came as investors welcomed a report showing that the U.S. added fewer jobs than expected last month. The lackluster snapshot of hiring appeared to increase the odds that the Federal Reserve will have to cut interest rates in coming months.
Stocks surged earlier this week when Federal Reserve Chairman Jay Powell said that the central bank would "act as appropriate" if the trade disputes threatened U.S. economic expansion. The lackluster jobs report could signal growing caution by businesses as economic growth slows and the U.S. engages in multiple trade conflicts.
"It's a strange market right now," said Gene Goldman, chief investment officer and director of research at Cetera Financial Group. "The markets are taking bad news as good news as reason to rally." The S&P 500 index rose 29.85 points, or 1.1%, to 2,873.34. The benchmark index notched its first weekly gain in five weeks and its best weekly gain since the week of November 26.
The Dow Jones Industrial Average gained 263.28 points, or 1%, to 25,983.94. It had briefly been up 352 points. The Nasdaq composite climbed 126.55 points, or 1.7%, to 7,742.10. The Russell 2000 index of smaller companies picked up 10.85 points, or 0.7%, to 1,514.39.
Major stock indexes in Europe also finished higher. Bond prices rose, pushing yields lower, a sign that the market is worried about slower economic growth. The yield on the 10-year Treasury fell to 2.08% from 2.12% on Thursday. That hurt banks, which rely on higher yields for profit from loan interest. Citigroup slid 1.2%.
Most other sectors climbed Friday. Technology stocks led the gainers. Microsoft rose 2.8% and Apple added 2.7%. Health care companies and internet stocks were also among the largest gainers. Johnson & Johnson rose 1.4%, Facebook climbed 3% and Twitter added 3.7%.
Retailers notched solid gains, led by Foot Locker, which climbed 3.3%. Ross Stores closed 3.1% higher. Analysts are more confident that the Fed is closer to cutting rates as it gauges the latest weak employment data and downward revisions for previously reported data. The Labor Department said U.S. employers added just 75,000 jobs last month, and also said hiring in March and April was not quite as robust as originally reported.
"The stock markets are banking on the Fed's ability to step in and save the day, as it has for much of the last decade," said Cliff Hodge, director of investments for Cornerstone Wealth. The next rate cut could come as early as July, he said, as the slide in bond yields signals that investors are preparing for slower economic growth.
While investors welcome the idea of a rate cut, such a move would suggest that the central bank is worried about the economy, which would not be good for the labor market, said Sameer Samana, senior global market strategist at Wells Fargo Investment Institute.
"We would view that as a sugar high as opposed to what the market really needs in order to make meaningful new highs driven by fundamentals," Samana said. "Especially today with the market now back close to 2,900, our 2 cents for investors would be that the risk outweighs the reward."
Investors were also optimistic about prospects for a U.S.-Mexico trade deal. The U.S. is poised to start imposing 5% tariffs on Mexican goods Monday but both sides are negotiating and media reports have suggested that the U.S. could consider delaying the tariffs.
Even with this week's gains, several sectors have a ways to go before they make up the losses they suffered last month as the trade disputes escalated. The technology heavy Nasdaq is still down 5.2% from its record on May 3. Facebook and Google parent Alphabet dragged down the internet-heavy communications sector over the past month. It's down 7.5% from its April 29 high, the worst drop of any S&P sector. Consumer-focused stocks are down 4.6%, with a large portion of companies depending on China for significant revenue.
Meanwhile, investors have bought bonds, signaling their expectation that the Fed would cut rates. The yield on the 10-year Treasury is now 2.08%, down from a close of 2.48% on April 7. Yields move inversely to bond prices.
On Friday, traders showed a hearty appetite for Beyond Meat, driving its shares 39.3% higher, after the plant-based meat maker beat Wall Street's first quarter financial forecasts. The company also gave investors a solid revenue forecast for the year. At around $138, Beyond Meat's stock price is now more than five times higher than the $25 offering price of its May 2 initial public offering.
Barnes & Noble rose 11.1% after the last of the big book retailers announced its sale to a hedge fund for $476 million. Elliott Management is expected to complete the buyout in the third quarter. The chain was blamed for the demise of independent bookstores and was ultimately laid low by the shift to online sales and Amazon's rise.
Energy futures finished higher Friday. Benchmark U.S. crude gained 2.7% to settle at $53.99 a barrel. Brent crude oil, the international standard, closed 2.6% higher at $63.29 a barrel. Wholesale gasoline rose 1.8% to $1.74 per gallon. Heating oil climbed 2% to $1.82 per gallon. Natural gas added 0.6% to $2.34 per 1,000 cubic feet.
Gold rose 0.3% to $1,346.10 per ounce, silver added 0.8% to $15.03 per ounce and copper slid 0.9% to $2.63 per pound. The dollar fell to 108.15 Japanese yen from 108.44 yen on Thursday. The euro strengthened to $1.1338 from $1.1273.