All the major indexes rose more than 2 percent Friday, including the Dow Jones industrial average, which rose more than 200 points as investors looked past another bleak jobs report and awaited word from Washington about an economic stimulus plan and changes to the government's financial rescue program.
The Senate was expected to vote on its version of a stimulus plan that would include a mix of spending and tax cuts. The Senate bill would cost $937 billion; the House already passed a similar version.
Financial stocks led the market as investors also awaited the government's latest revisions to its lifeline for banks. Treasury Secretary Timothy Geithner and other top officials are close to finishing a plan to overhaul the government's $700 billion financial rescue fund. Geithner is expected to announce the changes in a speech on Monday.
Some investors had been worried that the changes would involve nationalizing many banks and, in the process, wiping out shareholders. Many investors are hoping the plan will relax rules requiring businesses to assign a value to all of their assets each quarter. Advocates say altering the rule even temporarily could make it easier for banks to lend without worrying about depleting their cash reserves and running afoul of accounting standards.
Investors focusing on the government's plans were unfazed by a terrible employment reading. The Labor Department said U.S. employers slashed 598,000 jobs in January, the most since late 1974. The unemployment rate rose to 7.6 percent, the highest since late 1992.
But the market has been bracing for the wave of layoffs to hit the economy and are now looking for the response from the Obama administration and lawmakers.
"All focus right now is now is really on Washington," said Dan Cook, senior market analyst at IG Markets in Chicago. He said investors are hoping the unemployment report was bad enough that it goads lawmakers into swift action on the stimulus plan. "It's the hope that the Senate will act and get this approved."
Stocks have been getting a lift on expectations the plan will pass, analysts say.
Scott Fullman, director of derivatives investment strategy for WJB Capital Group in New York, said investors now are wondering "will government stimulus stop this virus that's spreading throughout the country?"
According to preliminary calculations, the Dow industrials rose 217.52, or 2.70 percent, to 8,280.59 after rising 106 on Thursday.
Broader stock indicators also jumped. The Standard & Poor's 500 index rose 22.75, or 2.69 percent, to 868.60, and the Nasdaq composite index rose 45.47, or 2.94 percent, to 1,591.71.
The day's gains have left the Nasdaq higher for the year; investors have been turning to the index's tech stocks on the belief they will help lead the market higher.
The Russell 2000 index of smaller companies rose 15.62, or 3.43 percent, to 470.70.
Advancing issues outnumbered decliners by about 5 to 1 on the New York Stock Exchange, where volume came to 1.61 billion shares.
On Thursday, the major indexes soared more than 1 percent as Wall Street shrugged off troubling economic reports and searched for bargains among battered retail and technology stocks.
Bond prices were mixed Friday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.98 percent from 2.92 percent late Thursday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.28 percent from 0.26 percent.
The dollar was mostly higher against other major currencies. Gold prices fell.
Light, sweet crude fell $1 to $40.17 a barrel on the New York Mercantile Exchange.
