Hopes for progress in the U.S.-China trade dispute, a strong report on the U.S. jobs market and encouraging comments from the head of the U.S. central bank about its interest rate policy all combined to cheer investors.
China's Commerce Ministry said trade talks will be held Monday and Tuesday in Beijing, and investors will again look for signs the world's largest economic powers are resolving their dispute. The tensions have dragged on for nearly a year, slowing business and dragging down stock indexes worldwide.
Meanwhile the Labor Department said U.S. employers added 312,000 jobs last month, a far stronger result than experts had anticipated. U.S. stocks have tumbled since October as investors worried that the economy might slow down dramatically because of challenges including the trade dispute and rising interest rates.
The stock market's plunge also threatened to shake up the confidence and the spending plans of businesses and consumers. Some analysts said investors were acting as if a recession was on the horizon, despite a lack of evidence that the U.S. economy is struggling.
"It's hard to square recession worries with the strongest job growth we've seen in years," said Alec Young, managing director of global markets research for FTSE Russell. Stocks rose even further after Federal Reserve Chairman Jerome Powell said the central bank will be flexible in deciding if and when it raises interest rates. He added that the Fed is open to making changes in the way it shrinks its giant portfolio of bonds, which affects rates on long-term loans such as mortgages.
Until recently, the Fed had suggested it planned to raise short-term interest rates three times this year and next, and Powell said the Fed's balance sheet was shrinking "on auto-pilot." Wall Street feared that the Fed might be moving too fast in raising borrowing costs, said Phil Orlando, chief equity market strategist at Federated Investors.
The Fed's interest-rate and bond portfolio policies "were at the top of the list of things we were concerned about, which is why the statement Powell made today is so supportive of the market," Orlando said. "The Fed understands that what they attempted to communicate last month was inartful, that they didn't get the right message across, and Powell tried to reset."
The S&P 500 index climbed 84.05 points, or 3.4 percent, to 2,531.94, more than wiping out Thursday's loss. The Dow rose 3.3 percent to 23,433.16 after gaining 832 during the afternoon. The Nasdaq composite jumped 275.35 points, or 4.3 percent, to 6,738.86.
About 90 percent of the stocks on the New York Stock Exchange traded higher. Stocks sank Thursday after Apple said iPhone sales in China are falling, partly because of the trade fight, and a survey suggested U.S. factories grew at a weaker pace. Technology companies took their biggest losses in seven years.
The U.S. and China have raised tariffs on billions of dollars of each other's goods in a fight over issues including Beijing's technology policy. Last month, President Donald Trump and Chinese leader Xi Jinping agreed to 90-day ceasefire as a step toward defusing tensions, but that failed to calm the stock market.
Technology companies, banks, health care and industrial companies all made strong gains. Most of the companies in those industries stand to do better in times of faster economic growth. Smaller and more U.S.-focused companies did even better than larger multinationals. The Russell 2000 index surged 49.92 points, or 3.8 percent, to 1,380.75. Smaller companies have fallen further than larger ones in the last few months as investors got nervous about how the U.S. economy will perform in 2019 and 2020.
Stocks have whipsawed between huge gains and losses for the last few weeks after their big December plunge. Katie Nixon, the chief investment officer for Northern Trust Wealth Management, said investors will continue to react to the health of the economy, and to concerns about high levels of corporate debt as interest rates rise.
"We don't expect that this will be the end to the volatility," she said. "There's mounting evidence we're going to see a slowdown," albeit not a severe one. Bond prices also changed course and moved sharply lower. The yield on the 10-year Treasury note rose to 2.66 percent after it plunged to 2.55 percent Thursday, its lowest in almost a year. That helps banks, as higher interest rates allow them to make bigger profits on mortgages and other loans.
European shares also overcome losses from a day earlier, with Germany's DAX gaining 3.4 percent and France's CAC 40 rising 2.7 percent. Britain's FTSE 100 advanced 2.2 percent. In Asia, Hong Kong's Hang Seng jumped 2.2 percent. South Korea's Kospi added 0.8 percent. Japan's Nikkei 225 index fell 2.3 percent on its first day of trading in 2019 as technology and electronics makers slumped on Apple's report that Chinese iPhone sales were slipping.
U.S. crude oil added 1.8 percent to $47.96 a barrel in New York. Brent crude, used to price international oils, was up 2 percent to $57.06 per barrel in London. The dollar strengthened. It rose to 108.51 yen from 107.77 yen. The euro rose to $1.14 from $1.1391. The British pound moved up to $1.2740 from $1.2630.
Wholesale gasoline dipped 0.1 percent to $1.35 a gallon and heating oil added 1.6 percent to $1.77 a gallon. Natural gas rose 3.4 percent to $3.04 per 1,000 cubic feet. In other trading, gold fell 0.7 percent to $1,285.80 an ounce and silver slipped 0.1 percent to $15.79 an ounce. Copper rose 3.1 percent to $2.65 a pound.
Stan Choe contributed to this story from New York. Annabelle Liang contributed from Singapore.
AP Markets Writer Marley Jay can be reached at http://twitter.com/MarleyJayAP