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.
Losers included housing stocks and Twitter, which dropped 7 percent the day after its initial public offering.
Friday’s jobs report left investors grappling with how to interpret this week’s good economic news and what it means for the Federal Reserve’s stimulus program. That program 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. He said the jobs report was positive because it showed the economy was improving, but perhaps not strongly enough to assure that the Fed will pull back on its bond-buying program before the end of year.
The Dow gained 167.80 points, or 1.1 percent, to 15,761.78. It 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.
The reaction to the jobs news was more pronounced in the Treasurys market. The yield on the 10-year Treasury note jumped to its highest level in six weeks as investors sold Treasurys, anticipating less demand 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 from 2.60 percent on Thursday to 2.75 percent Friday, 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.
Rising Treasury yields lead to higher mortgage rates, and that 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 Fed 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 Fed’s role in the stock market surge has been overstated, compared with 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 results for the third quarter. Earnings are expected to rise 5.6 percent, compared with 4.9 percent in the second quarter and 2.4 percent a year earlier.